Abstract Book of the 9th World Conference on Social Sciences
Year: 2025
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Creditor Rights, Firm Size and Equity Issuance: Evidence from A Quasi-Natural Experiment in India
Jyoti Ranjan Sahoo, Ajay Kumar Mishra
ABSTRACT:
This study examines the impact of strengthened creditor rights on the equity issuance decisions of firms of varying sizes in India. Using firm-level data and a difference-in-differences framework, we investigate how improvements in creditor protection influence corporate financing choices, particularly between smaller and larger firms. The findings reveal that smaller firms significantly reduce their equity issuance following the enhancement of creditor rights, indicating a shift toward debt financing as improved creditor protection enhances their access to credit markets. In contrast, larger firms exhibit a relatively muted response, reflecting their already favourable borrowing conditions. The results remain robust across alternative firm-size classifications and model specifications. This study contributes to the literature on capital structure by highlighting how creditor protection reforms shape financing behaviour differently across firm sizes. The findings provide useful insights for policymakers and financial institutions seeking to understand how legal and institutional reforms affect the financing flexibility of small and large firms.
Keywords: Creditor Rights, Equity Issuance, Firm Size, Capital Structure, IBC, India