In 2002, a legal reform introduced in India allowed secured creditors to seize and liquidate the defaulter's assets. We study firms' choice between capital and labor in response to these strengthened creditor rights by exploiting variation in their pre-policy proportion of collateralizable...

Strategic default by firms remains a global concern. Although the theoretical literature studies this phenomenon, empirical evidence is scant as data categorizing defaults as strategic or distress-driven is unavailable. We use unique data from India to investigate how firms that strategically...

We argue that when bankruptcy code is creditor friendly, excessive liquidations cause levered firms to shun innovation, whereas by promoting continuation upon failure, a debtor-friendly code induces greater innovation. We provide empirical support for this claim by employing patents as a proxy...