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How do Stronger Insolvency Laws Impact Borrower Decisions?

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ROMANIA:. How do Stronger Insolvency Laws Impact Borrower Decisions?. Policy questions. Study the impact of new out-of-court debt restructuring guidelines introduced in Romania in November 2010

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Presentation Transcript
policy questions
Policy questions
  • Study the impact of new out-of-court debt restructuring guidelines introduced in Romania in November 2010
    • The debtor and the creditor now have the option to enter into a mutually agreed upon debt restructuring, in a way that allows the debtor to continue doing business
    • Out-of–court restructuring is perceived as more effective than the court process because in successful cases, the dispute is settled earlier and the debt is recovered more often.
    • Currently, most delinquent borrowers enter insolvency
policy questions1
Policy questions
  • As a simpler and cheaper alternative to the courts, the main expected beneficiaries are SME’s.
  • Our aim is to identify:
  • The causal effects of learning about the new law on SME borrower:
    • loan repayment rates
    • the size and frequency of new loan requests
  • The impact of in-person training relative to other delivery mechanisms, such as mail, video, and internet.
intervention
Intervention
  • We test the interactive impact of:
    • Learning about the new law
    • The delivery mechanism of educating borrowers

Classroom lecture

E-learning

Video

Mailing

(lowest) Intervention Cost (highest)

future influence on policy
Future influence on policy
  • For WB/IFC staff & government partners:
    • Understanding the potential impact of insolvency reforms on financial stability, employment, and firm survival
  • For lenders:
    • Identifying a cost-effective way to inform borrowers of insolvency reforms
    • Reducing losses and improving profitability
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