Creditor Rights and Firm Productivity: Evidence from Emerging Markets

This study investigates the effect of creditor rights on firm productivity in emerging markets using two empirical approaches. The first approach employs a cross-country analysis with regression techniques, revealing that stronger creditor rights are associated with higher firm productivity in these markets. The second approach utilizes the implementation of the Insolvency and Bankruptcy Code 2016 in India as a quasi-natural experiment to address potential omitted variable bias and confounding effects. Using the Difference-in-Differences method, this analysis confirms that enhancements in creditor rights lead to increased firm productivity, attributable to reduced misallocation of economic resources and improved technology adoption. Additionally, the study demonstrates that better creditor rights contribute to higher capital and labor productivity.