The 2005 Bankruptcy Reform puts derivatives contracts into an effective “super-senior” status. It is intended to provide stability to the derivative markets and reduce systemic risk, however, we find that it has negative impact on derivative-using firms' borrowings. The theoretical model in...

We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm's leverage policy. We show that the two indexes have at most a...