This paper studies the effect of the 2005 Bankruptcy Reform in Brazil. Using firm-level data we found that the increase in the level of creditors' protection reduced the cost of debt and increased the amount borrowed by the firms.

Purpose – The purpose of this paper is to study the effect of changes in creditors' priority defined by the bankruptcy law on firms' capital structure. Design/methodology/approach – Taking advantage of the Brazilian bankruptcy law reform as an experiment and using publicly traded firms'...

In 2004, Brazil provided an interesting natural experiment concerning personal credit. A new law was enacted allowing banks to offer loans with repayment through automatic payroll or social security benefit deduction, thus removing a significant part of the moral hazard problem by eliminating...