Speaker: Dr. 李劢 (Mai Li)

Title: The Value of Bankruptcy Enforcement in Financial Distress

Schedule: Nov 30, Th 1:30-3:00 PM

Location: 诚明楼 (Chengming Hall）RM 315

Introduction: 李劢，北京大学光华管理学院金融学系助理教授。2014年毕业于北京大学光华管理学院金融专业，2020年于美国哥伦比亚大学获得经济学博士学位。研究方向为公司金融，国际金融与宏观经济学。

Abstract: The bankruptcy process in many countries is lengthy and cumbersome, which prevents creditors from getting repaid efficiently in distress. Exploiting the staggered introduction of specialized bankruptcy courts in China, we find that they lead to sizable reductions in the cost of debt financing. In particular, bond spread represents a decrease by 7.6%, with a stronger effect on privately owned enterprises and issuers of higher default risk. By analyzing manually collected bankruptcy filings, we find court enforcement explains 40% of the variation in bond spreads. Exploration on the default resolution shows that the potential mechanisms are reduction in liquidations, shorter bankruptcy proceedings, less government interference, and higher bondholder recovery rate. Better creditor protection translates into significant increases in debt capacity, bond maturity and investment by bond issuers. These results indicate that stronger court enforcement is a necessary precondition for firms to benefit from judicial reforms in handling the USD 120.2 billion bond defaults.