Creditor Rights and Strategic Default: Evidence from India
By Prasanna Tantri
Journal of Law and Economics | August 2020
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papers.ssrn.com/sol3/papers.cfm?abstract_id=3543249
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Tantri, Prasanna. Creditor Rights and Strategic Default: Evidence from India Journal of Law and Economics papers.ssrn.com/sol3/papers.cfm?abstract_id=3543249.
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Journal of Law and Economics, 2020
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Abstract
We examine whether higher creditor rights prevent strategic default. Borrowers who cross either of two thresholds are exempt from a creditor rights law in India. Using a loan day-level dataset, we find that loan performance is better when the law applies and that outperformance increases after a further rise in creditor rights. To discern the strategic motive, we use an unprecedented invalidation of the Indian currency whereby holders of high-value currency were forced to declare their cash holdings to banks. Defaulters exempt from the law showed a greater tendency to repay their loans during the ban period.

Prasanna Tantri is an Associate Professor of Finance at the Indian School of Business (ISB) and Executive Director of the Centre for Analytical Finance (CAF). He previously served as an Independent Director and Chair of the Audit and CSR Committees on the Board of Power Finance Corporation Limited, Government of India.

His research focuses on banking, financial inclusion, and the political economy of finance, with publications in leading journals including the Review of Financial Studies, Review of Finance, Journal of Accounting and Economics, Journal of Accounting Research, Management Science, and Journal of Financial and Quantitative Analysis. He has presented his research at premier academic forums and has received several competitive research grants and teaching awards.

Prasanna’s work has been widely cited in policy and media, including The Economist, Bloomberg, Mint, and The Economic Times, and has been referenced in the Union Budget, the Economic Survey of India, and RBI reports. He has advised and presented his work to the Prime Minister’s Office, Ministry of Finance, RBI, and several central and state government bodies. He also headed the group entrusted by the Government of Telangana with drafting the Telangana Vision 2047 document, contributing to the development of the state’s long-term vision and strategic roadmap. Over the years, he has also contributed to several high-level advisory and expert bodies, including the Technical Advisory Committee under DMEO, NITI Aayog, and expert groups constituted by the National Stock Exchange and SEBI. These engagements reflect his broader contribution to translating rigorous academic research into policy and regulatory practice.

Prasanna Tantri
Prasanna Tantri