How IBC changes the game

The Insolvency and Bankruptcy Code is beneficial to the extent it generates modified behaviour on the part of managers and lenders

The implementation of the Insolvency and Bankruptcy Code (IBC) is facing difficulties. For the largest firms, there is a whiff of SICA (Sick Industrial Companies Act) in the air, with endemic delays. However, the incentive effects of the IBC run deeper. Chief executive officers (CEOs) of the largest firms will be relatively arrogant. Other CEOs face substantial inconvenience owing to the threat of the IBC. Looking forward, this is likely to yield behavioural changes including: Less leverage, and early responses to financial distress ranging from bringing in new equity capital to selling off the firm. Lenders will be more wary