Access to Credit after Emerging from Corporate Bankruptcy

Chloé Zapha () and Banque de France
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Chloé Zapha: Banque de France - Banque de France, Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres, LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper identifies the credit restrictions that small firms are facing after emerging from bankruptcy. Using the French credit register, I implement a differencein-difference strategy that exploits staggered removal of bankruptcy flags in the form of an exogenous change in credit ratings. I focus on small and medium businesses between 2012 and 2019 and show that the flag removal leads to an increase in bank credit of 1.7%. The flag removal does not make relationship banks forget about the past bankruptcy. Instead, it removes adverse information for new banks that subsequently start lending. As a result, financially constrained firms rely less on supplier debt and increase their investment by 15%.

Keywords: Corporate Bankruptcy; Debt Restructuring; Credit Rating; Bank Lending Relationship; SMEs (search for similar items in EconPapers)
Date: 2023-01-26
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-des and nep-ent
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