| Abstract |
We use a simple model to predict how creditor rights in bankruptcy a¤ect the accumulation and magnitude of indirect bankruptcy costs. We empirically identify these e¤ects by using two matched samples of bankrupt firms that provide us with variation in creditor rights. Consistent with our model, we find evidence that, when creditor rights are stronger, indirect bankruptcy costs are lower prior to bankruptcy, and that these costs accumulate more slowly in the period preceding a bankruptcy filing.
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