The impact of Covid-19 on the capital structure in emerging economies: evidence from India

PurposeCapital structure is an important corporate financing decision, particularly for companies in emerging economies. This paper attempts to understand whether the pandemic had any significant impact on the capital structure of companies in emerging economies. India being a prominent emerging economy is an ideal candidate for the analysis.Design/methodology/approachThe study utilizes three leverage ratios in an extended market index, BSE500, for the period 2015–2021. The ratios considered are short-term leverage ratio (STLR), long-term leverage ratio (LTLR) and total leverage ratio (TLR). A dummy variable differentiates the pre-epidemic (2015–2019) and pandemic (2020–2021) period. Control variables are used to represent firm characteristics such as growth, tangibility, profit, size and liquidity. Dynamic panel data regression is employed to address endogeneity.FindingsThe findings point out that Covid-19 has had a significant, negative effect on LTLR, while the impact on STLR and TLR was insignificant. The findings indicate that companies based in a culturally risk-averse environment, such as India, would reduce the long-term debt to avoid bankruptcy in times of uncertainty.Research limitations/implicationsThe study covers the impact of the pandemic on Indian companies. Hence, generalization of the findings to global context might not be valid.Practical implicationsTo maintain economic growth in the post-crisis period, Indian policymakers should ensure accessibility to low-cost capital. The findings provide impetus to deepen the insignificant corporate bond market in India for future economic revival.Originality/valueDeveloping countries are struggling to revive the economies postpandemic. This is particularly true for Asian economies which are heavily reliant on banks for survival. This research finds evidence to utilize bond market as a source of raising capital for economic revival.

Sobre la funcionalidad del Derecho concursal: the second chance?

En esta contribución se reflexiona acerca de la evolución y la virtualidad del Derecho concursal desde el enfoque que nos ofrece la legislación española, teniendo muy presentes las dificultades económicas que atraviesan los operadores dentro de la situación de pandemia ocasionada por el covid-19. Desde esta óptica, se analiza un instituto de gran interés, conocido como “segunda oportunidad” (beneficio de la exoneración del pasivo insatisfecho), que es traslación de instituciones procedentes de otras legislaciones. Se estudia cómo está reglamentado y cuáles son las cuestiones que aún están pendientes de aclarar y mejorar para que sirva a los objetivos pretendidos.Alternate :This contribution reflects on the evolution and virtuality of bankruptcy law from the approach offered by Spanish law, bearing in mind the economic difficulties that operators are going through in the pandemic situation caused by covid-19. From this point of view, an institute of great interest known as “second chance” (benefit of the exemption of unsatisfied liabilities) is analyzed, which is the transfer of institutions from other legislations. It is studied how it is regulated and what are the issues that are still pending clarification and improvement so that it serves the intended objectives.

Purdue's Poison Pill: The Breakdown of Chapter 11's Checks and Balances

Purdue Pharma, the bankrupt drug manufacturer at the center of the opioid crisis, settled its civil and criminal liability for opioid harms with the Department of Justice in a deal that contained a "poison pill" that prevented creditors from objecting to any subsequent plan of reorganization for Purdue: if creditors exercised their rights and pushed for Purdue 's liquidation, they would forfeit all of Purdue's value to the Department of Justice. This Article argues that Purdue illustrates how the procedural checks and balances that make Chapter 11 bankruptcy a fair and credible system have broken down. Purdue represents the confluence of three trends in bankruptcy: (1) increasingly aggressive and coercive restructuring techniques like the poison pill that lock in the determination of subsequent decisions in the bankruptcy;(2) the lack of appellate review for many key bankruptcy issues;and (3) the rise of "judge-shopping," facilitated by bankruptcy courts' local rules that enable debtors to handpick their judge. While each of these trends is problematic in its own right, standing alone they do not undermine the fundamental fairness of the bankruptcy system. Their convergence, however, results in a broken legal system in which a single non-Article III judge of the debtor 's choosing is the only real check on what the debtor can do in Chapter 11. This situation enables debtors to push through overreaching restructuring transactions that benefit favored creditors and allies at the expense of disfavored creditors, like the opioid victims in Purdue.

Addressing the Next State Fiscal Crisis: Toward an Ex Ante Scheme of Federal Assistance to States in Fiscal Distress

The Brookings Institute projects that state and local revenues will decline $155 billion in 2020 (5.5%), $167 billion in 2021 (5.7%), and $145 billion in 2022 (4.7%).4 Dwindling revenues are insufficient to cover mounting costs, and budget shortfalls are mounting.5 The looming state economic crisis has spurred a debate about the proper federal response.6 One position, often represented by governors or Congressional Democrats, advocates for massive federal aid to distressed states.7 In talks regarding the second COVID-19 stimulus, for example, Democrats pushed for more than $900 billion in federal aid to states, reasoning that states are unable to cope independently with their financial troubles.8 Without federal funds, argue the proponents of federal assistance, states may collapse, bringing the nation's economy with them.9 The other position, often represented by congressional Republicans, objects to using federal funds for state bailouts.10 According to this view, states should handle their own finances, and federal funds should not be handed out to poorly-managed ("blue") states.11 In lieu of federal aid, a state bankruptcy solution is offered.12 Bankruptcy law, it is argued, can reduce the states' debt overhang and spread their losses among their creditors, obviating the need for federal funds.13 But both of the suggested federal responses, bankruptcy law and ex post federal aid, seem problematic. [...]states don't have the resources to finance their rising costs, and a state economic crisis develops. [...]opposite to the directives of standard economic theory, in times of recession states cut spending and investments, and these measures damage not only the distressed states, but also the national economy. [...]as emphasized by opponents of federal bailouts, federal aid creates moral hazard problems. if states know that the federal government will provide financial assistance when they fall on hard times, they have little motivation to save or follow prudent financial policies.17 Second, and no less importantly, the Article shows that because federal aid is provided through a political process, it is dispensed according to politicians' personal interests and not necessarily pursuant to the beneficiaries' financial needs.

How to Manage a Crisis: Entrepreneurial and Learning Orientation in Out-of-Court Reorganization

This paper analyzes the impact of SMEs' entrepreneurial and learning orientation on the outcome of reorganization. We draw on a resource-based view on reorganization, linked with entrepreneurial and learning orientation. Previous research indicates a higher success rate of out-of-court reorganization compared to formal court-supervised proceedings. Out-of-court solutions are handled privately, therefore little is publicly known about the process of an out-of-court reorganization and what determines its success or failure. Thus, we focus on out-of-court reorganization, analyzing a sample of 521 Austrian SMEs. The data were collected from the financing banks. To test our hypothesized model of the impact of entrepreneurial and learning orientation on reorganization success, we applied bivariate analyses and logistic regression. The findings indicate that both entrepreneurial orientation and learning orientation positively influence the success of reorganization. While action-oriented entrepreneurial orientation probably has a stronger impact on short-term success, vision-oriented learning orientation seems to be more important for long-term turnaround. Company size acts as a moderator, indicating that small companies are less likely to succeed than micro-and medium-sized companies. The study has implications for corporate practice and future research.

Is There a Chinese “Code of Capital”?

[...]the question: is there a Chinese “Code of Capital”? In posing the question of whether Professor Pistor’s analysis provides an explanatory lens for understanding comparative law and development and, specifically, Chinese law and development (Erie 2021, 54–55), I recognize that the litmus test of any theory is its ability to explain cases that may have been outside the purview of its original formulation. Professor Pistor’s paradigm helps explains the contemporary topography of global capitalism: the concentration of financial and legal expertise in London and New York, as well as the roles of tax havens, which function, respectively, to transform and shield capital accumulation as financial assets. [...]one of the core attributes of state capitalism is the nature of law that underlies and enables that system, and critically, unlike the UK or US, China is not a rule-of-law state, but a Party-State.

Key Indicators of Corporate Financial Status: Empirical Evidence from Indian Industrial Sector

The present pandemic situation has led to the rise in the number of financially distressed companies in the Indian business ecosystem. Stakeholders, especially shareholders, unsecured and trade creditors who do not enjoy lien on company assets, should be extra cautious about the financial status of a company before making any investment or lending decision. The present study attempts to suggest the key indicators of corporate financial status after analysing 12 ratios from the financial statements of 162 sample companies for five financial years. The suggested key indicators can assist the shareholders and creditors in differentiating a financially distressed company from a financially sound company in the Indian industrial sector.

The Economic Impact of the Covid-19 Pandemic Related to Bahrain's Bankruptcy Law

The purpose of this paper is to address the concerns relating to the economic impact of the Covid-19 Pandemic in the Kingdom of Bahrain by observing the preventive measures taken by the government to ensure minimal economic deterrence. Furthermore, the paper shall also address the role and the position of the Reorganization and Bankruptcy Law no. (22) 2018 of Bahrain in light of the economic duress faced by the businesses in Bahrain and the role played by the government and financial institutions in resolving matters relating to bankruptcy that would be more prevalent due to the Covid-19 Pandemic. The importance of the research is highlighted by highlighting the economic impact and the mechanism of bankruptcy procedures followed in Bahrain, especially in light of the global economic crisis it is facing due to the Covid-19 pandemic. The study aims to clarify the laws related to bankruptcy with a study of the current situation in Bahrain. As there is no previous study regarding the economic effects on the movement of trade in the Kingdom of Bahrain in light of the Corona pandemic and the role of bankruptcy law in that. It was also clarified through this study to the close relationship between local legislation and international legislation and agreements related to this subject.