Bankruptcy Regime Change and Credit Risk Premium on Corporate Bonds: Evidence from the Indian Economy

Summary

Ours is the first study to analyse the influence of the IBC on the cost of credit in the bond market. [...] Ours is the first study to analyse the influence of the IBC on the cost of credit in the bond market. [...] Within the “treatment” group of non-finance firms, the impact of the IBC on the credit spreads of the non-PSU firms, compared to the PSU, finance firms, has been in the expected direction but it is found to be statistically insignificant. [...] The difference between the annualised coupon of the corporate bond and the corresponding ZCYC yield is taken as the credit spread on the bond. [...] The overarching objective of the IBC was to alter the behaviour of the creditors, especially the financial creditors, and bring about a comprehensive improvement in the credit landscape in India, particularly in the context of corporate bond market development.