Year: 2018
Type: article
Study design: Observational Study
Abstract: Using unique borrower-level data, we study the causal effect of debt relief on the loan performance of distressed and nondistressed borrowers. We employ a regression discontinuity design that exploits exogenous cutoff dates underlying the 2008 Indian debt waiver program to separate defaulters on loans into beneficiaries and nonbeneficiaries of waivers. By identifying distress before the waiver program using exogenous borrower-level shocks, we examine performance on loans originated after the waiver program. Loan performance of nondistressed beneficiaries worsens, while that of distressed borrowers improves. While existing studies aggregate the effects of debt relief across distressed and nondistressed borrowers, we highlight crucial differences between them.
Source: The Journal of Law and Economics
DOI: 10.1086/701902
Authors: Saptarshi Mukherjee, Krishnamurthy Subramanian, Prasanna Tantri
Institutions: New York University, Indian School of Business
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: bronze
OpenAlex ID: W2945293104