“…For example, Thorburn (2000) has analysed Swedish, Spear (1989) French, Sundgren (1998) Finnish, Takagi (2003 Japanese, and Eger (2001), Franks et al (1996), and Schwehr (2003) German reorganization procedure while Kaiser (1996), Couwenberg (2001), Philippe et al (2002), Davydenko and Franks (2008), and Blazy et al (2008) have compared procedures in different countries. In fact, most countries seek to improve the efficiency of their procedures by encouraging the reorganization of viable firms and the liquidation of non-viable ones.…”
“…For example, Thorburn (2000) has analysed Swedish, Spear (1989) French, Sundgren (1998) Finnish, Takagi (2003 Japanese, and Eger (2001), Franks et al (1996), and Schwehr (2003) German reorganization procedure while Kaiser (1996), Couwenberg (2001), Philippe et al (2002), Davydenko and Franks (2008), and Blazy et al (2008) have compared procedures in different countries. In fact, most countries seek to improve the efficiency of their procedures by encouraging the reorganization of viable firms and the liquidation of non-viable ones.…”
Secured and unsecured creditors engaged in a bankruptcy process have different preference on the issue of financial distress. Secured creditors generally prefer liquidation whereas unsecured creditors tend to promote firm's reorganization. As a consequence, secured creditors might be an obstacle to reorganization when all classes of creditors have to vote to approve the reorganization plan. To complete this analysis, we study the link between bankrupt firm's capital structure and the likelihood of reorganization when bankruptcy Courts (instead of creditors) decide whether or not firms are reorganized. Our main result is that the reduction of secured creditors' influence on the reorganization process might constitute a means to promote bankrupt firm's reorganization. More generally, the paper analyses the link between the amounts/numbers of both secured and unsecured claims and the final issues of a Court-supervised reorganization process.
“…16 In Italy, for example, only 2% of the insolvency proceedings concerned the ''Concordato Preventivo'', which is a recovery procedure, while 97% of them concerned liquidation, at least before the Bankruptcy reform adopted in recent years (legge delega n. 80/2005;Franzoni and Marchesi 2006). 17 Note however that, as explained by Blazy et al (2008), World Bank data cannot serve as proxy for differences in courts' selection errors (type-I/type-II) between countries. In fact, ''… some economically The efficiency of a bankruptcy system can be evaluated for the three stages of the bankruptcy process (Couwenberg and de Jong 2008;Franks et al 1996).…”
Section: Methodology and Datamentioning
confidence: 99%
“…Also labour market rigidity influences investment share of GDP through Bankruptcy regulation. Blazy et al (2008) show that the social pro debtor model performs in countries within which the legal protection of workers are the more severe. The legal protection of workers may serve to understand why some bankruptcy models promote continuation of firms' operations, or allow for deviations from absolute priority rule in favour of workers.…”
Section: Dealing With Endogeneitymentioning
confidence: 98%
“…Another instrumental variable for Bankruptcy Law might be the legal origin of the judicial system (La Porta et al 1998). Blazy et al (2008), in fact, show that Bankruptcy models may differ across countries because they come from different legal families. Also labour market rigidity influences investment share of GDP through Bankruptcy regulation.…”
This paper examines the relationship between the insolvency systems and the investment share of GDP across countries. The objective is to find out the relationship between bankruptcy procedures and economic performances around the world. Empirical evidence suggests that: (1) the investment share of GDP is higher in those countries characterized by highly efficient bankruptcy system; the more efficient the insolvency procedures in terms of time, cost and recovery rate, the more readily available debt is and the higher the Investment/GDP ratio is; (2) the investment share of gross domestic product is positively associated with the degree of sophistication of the Bankruptcy Law, at least below a certain level of legal production; (3) data suggest some complementary effect between Bankruptcy Law and Enforcement for rich countries, while the interaction term indicates some substitution effect when poor countries are considered. Some policy implications conclude the work.
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