The impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Repo ‘Safe harbor’ provisions on investors

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Rights statement: This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 02/02/2018, available online: http://www.tandfonline.com/10.1080/1351847X.2018.1427608
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https://doi.org/10.1080/1351847X.2018.1427608
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Keywords

Repurchase agreements, bankruptcy code, safe harbor

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The impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Repo ‘Safe harbor’ provisions on investors. / Chircop, Justin; Fabrizi, Michele; Parbonetti, Antonio.
In: European Journal of Finance, Vol. 24, No. 18, 2018, p. 1772-1798.

Research output: Contribution to Journal/Magazine › Journal article › peer-review

Bibtex

@article{eae1d6daad6f4d028387bf2ab6a40db9,

title = "The impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Repo {\textquoteleft}Safe harbor{\textquoteright} provisions on investors",

abstract = "The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 significantly expanded the exemptions from the normal workings of the U.S. Bankruptcy Code. Using a large sample of U.S. banks, we study investors{\textquoteright} reaction to news about the promulgation of the BAPCPA repo {\textquoteleft}safe harbor{\textquoteright} provisions and the influence extending such exemptions to repos collateralized by riskier collateral had on equity market information asymmetry. We find a negative market reaction to news events about the promulgation of BAPCPA, which subsequent cross-sectional analysis suggests is at least partly driven by repo exposure. This finding suggests that investors perceived the increase in finance risk from the extension of the {\textquoteleft}safe harbor{\textquoteright} provisions as dominating the perceived gain from accessing cheaper finance. Further, we find that the promulgation of BAPCPA gave rise to increased information asymmetry for banks with repo exposure. ",

keywords = "Repurchase agreements, bankruptcy code, safe harbor",

author = "Justin Chircop and Michele Fabrizi and Antonio Parbonetti",

note = "This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 02/02/2018, available online: http://www.tandfonline.com/10.1080/1351847X.2018.1427608",

year = "2018",

doi = "10.1080/1351847X.2018.1427608",

language = "English",

volume = "24",

pages = "1772--1798",

journal = "European Journal of Finance",

issn = "1351-847X",

publisher = "Routledge",

number = "18",

}

RIS

TY - JOUR

T1 - The impact of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 Repo ‘Safe harbor’ provisions on investors

AU - Chircop, Justin

AU - Fabrizi, Michele

AU - Parbonetti, Antonio

N1 - This is an Accepted Manuscript of an article published by Taylor & Francis in The European Journal of Finance on 02/02/2018, available online: http://www.tandfonline.com/10.1080/1351847X.2018.1427608

PY - 2018

Y1 - 2018

N2 - The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 significantly expanded the exemptions from the normal workings of the U.S. Bankruptcy Code. Using a large sample of U.S. banks, we study investors’ reaction to news about the promulgation of the BAPCPA repo ‘safe harbor’ provisions and the influence extending such exemptions to repos collateralized by riskier collateral had on equity market information asymmetry. We find a negative market reaction to news events about the promulgation of BAPCPA, which subsequent cross-sectional analysis suggests is at least partly driven by repo exposure. This finding suggests that investors perceived the increase in finance risk from the extension of the ‘safe harbor’ provisions as dominating the perceived gain from accessing cheaper finance. Further, we find that the promulgation of BAPCPA gave rise to increased information asymmetry for banks with repo exposure.

AB - The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) of 2005 significantly expanded the exemptions from the normal workings of the U.S. Bankruptcy Code. Using a large sample of U.S. banks, we study investors’ reaction to news about the promulgation of the BAPCPA repo ‘safe harbor’ provisions and the influence extending such exemptions to repos collateralized by riskier collateral had on equity market information asymmetry. We find a negative market reaction to news events about the promulgation of BAPCPA, which subsequent cross-sectional analysis suggests is at least partly driven by repo exposure. This finding suggests that investors perceived the increase in finance risk from the extension of the ‘safe harbor’ provisions as dominating the perceived gain from accessing cheaper finance. Further, we find that the promulgation of BAPCPA gave rise to increased information asymmetry for banks with repo exposure.

KW - Repurchase agreements

KW - bankruptcy code

KW - safe harbor

U2 - 10.1080/1351847X.2018.1427608

DO - 10.1080/1351847X.2018.1427608

M3 - Journal article

VL - 24

SP - 1772

EP - 1798

JO - European Journal of Finance

JF - European Journal of Finance

SN - 1351-847X

IS - 18

ER -

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