Template-Type: ReDIF-Paper 1.0 Author-Name: Biswajit Banerjee Author-Name-First: Biswajit Author-Name-Last: Banerjee Author-Email: biswajit.banerjee@ashoka.edu.in Author-Workplace-Name: Ashoka University Author-Name: Risto Herrala Author-Name-First: Risto Author-Name-Last: Herrala Author-Email: Author-Workplace-Name: The Bank of Finland Institute for Emerging Economies Title: Testing the impact of liquidation speed on leverage using Indian data Abstract: The paper investigates the influence of the speed of liquidation of insolvent firms on leverage. The theoretical model presented formalizes the intuitive view that an increase in liquidation speed is expected to decrease average leverage as highly leveraged firms exit. Analysis of Indian data, however, suggests that an increase in liquidation speed increases average leverage. This finding is linked to influential observations at the right tail of the leverage distribution. We propose an asset-weighted variant of the proposition that holds with empirical data. length: 23 Creation-Date: 20240430 Revision-Date: Publication-Status: File-URL:https://dp.ashoka.edu.in/ash/wpaper/paper114_0.pdf File-Format: Application/pdf Number: 113 Keywords: Indian economy Keywords: Insolvency and bankruptcy code Keywords: Leverage Keywords: Liquidation speed Handle: RePEc:ash:wpaper:113