Bankruptcy Reform, Geopolitical Risk and Firm Performance: Evidence from a Quasi-natural Experiment in India

This study examines whether the reinforcement of creditors’ rights mitigates the impact of geopolitical risk (GPR) on firm performance. To achieve this, the author utilises the enactment of the ‘Insolvency and Bankruptcy Code’ (IBC) in India in 2016 as a policy shock, creating a quasi-natural experiment. The difference-in-differences (DiD) analysis, centred on the implementation of the IBC, indicates that a bankruptcy reform favouring creditors alleviates the adverse effects of GPR on firm performance. These findings suggest that robust creditors’ rights incentivise firms to adopt more careful strategies, protecting their performance against challenges arising from increases in GPR. JEL Codes: G32, G33, G38