The Brazilian Payroll Lending Experiment

In 2004, Brazil provided an interesting natural experiment concerning personal credit. A new law was enacted allowing banks to offer loans with repayment through automatic payroll or social security benefit deduction, thus removing a significant part of the moral hazard problem by eliminating the choice of default when debtors are able to pay their loans out of their wages. We estimate the impact of the new law using car loans as a control group. We find that, at the industry level, the new law has caused a reduction in interest rates and an increase in the volume of personal credit.Credit markets, collateral, difference-in-differences. JEL Code: G21; D01; C33; K00; E44.

Interactions between Corporate Governance, Bankruptcy Law and Firms Debt Financing: the Brazilian Case

This paper examines the relationship between corporate governance level and the bankruptcy law for such debt variables as firms’ cost of debt and amount (and variation) of debt. Our empirical results are consistent with the model's prediction. First, we find that the better the corporate governance, the lower the cost of debt. Second, we find that better corporate governance arrangements relate to firms with higher amounts of debt. Finally we find that better governance and harsher bankruptcy laws have a positive effect on debt. Moreover, this effect is stronger for firms with worse corporate governance, which indicates that the law works as a substitute for governance practices to protect creditors' interests

O efeito da diversificação corporativa na estrutura de capital das firmas brasileiras

This study aims to determine whether corporate diversification increases the borrowing capacity of Brazilian companies by means of cross-pledging. Using a panel data model, we estimated the relationship between leverage and the degree of corporate diversification using a sample of companies listed on the São Paulo Stock Exchange (Bovespa) between 2009 and 2011 and Brazilian companies with access to international markets through American Depositary Receipts (ADRs) in the period 2003-2011. Using empirical tests, we found no relationship between diversification and debt in either sample, indicating that a strategy of corporate diversification should not be used as a strategy to expand a company's financing capacity.Este trabalho tem por objetivo verificar se a diversificação corporativa aumenta a capacidade de endividamento das firmas brasileiras por meio do cross-pledging. Utilizando o modelo de dados em painel, estimamos a relação entre alavancagem e o grau de diversificação corporativa usando uma amostra de empresas listadas na Bolsa de Valores de São Paulo (Bovespa) entre 2009 e 2011 e utilizando empresas brasileiras com acesso ao mercado internacional através de American Depositary Receipts (ADRs) no período de 2003 a 2011. Por meio dos testes empíricos, encontramos a não relação entre diversificação e endividamento em ambas as amostras, indicando que a estratégia de diversificação corporativa das empresas não deve ser utilizada como estratégia de expansão de sua capacidade de financiamento