In this paper, we investigate the extent in which creditor rights protection in bankruptcy induces banks to take more risk, leading to a higher level of systemic risk in the financial system. We apply ∆CoVaR, introduced by Adrian and Brunnermeier (2011), as the measure of systemic risk. Our...

I investigate how the effectiveness of the judicial system impacts corporate financing policy through the channel of covenant violations across the world. Financial covenant violations trigger creditors to use their contractual acceleration and termination rights to increase interest rates or...