Building Legal Indexes to Explain Recovery Rates: An Analysis of the French and English Bankruptcy Codes

Blazy, Régis; Chopard, Bertrand; Nigam, Nirjhar

doi:10.2139/ssrn.2086606

Cited by 5 publications

(16 citation statements)

References 24 publications

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“…Previous empirical research has persuasively demonstrated that ex-post efficiency of an insolvency regime is inter alia contingent on the choice of laws and procedures governing the proceedings (see, e.g., Armour et al 2008, Davydenko and Franks 2008, Haselmann et al 2010, Blazy et al 2013, Blazy and Stef 2015. Our analysis complements these findings by demonstrating that the ex-post efficiency of a given insolvency regime may also notably depend on who is entrusted with its administration.…”

Section: Introductionsupporting

confidence: 65%

“…the sum of payments to all creditors) after completion of the liquidation proceedings. After controlling for the total value of declared claims (see below), the total amount paid to creditors measures the expost efficiency of insolvency proceedings (see, e.g., Sundgren 1998, Thorburn 2000, Armour et al 2008, Davydenko and Franks 2008, Blazy et al 2013, Blazy and Stef 2015.…”

Section: Outcome Variablementioning

confidence: 99%

“…From the normative standpoint, the primary objective of bankruptcy proceedings is to attain an ex-post efficient outcome, that is, maximize the value of the financially distressed firm to be divided among the stakeholders (see, e.g., Hart 2006: 4, Blazy and Chopard 2004, Blazy et al 2013, Cornelli and Felli 2012). Yet detailed micro-level empirical evidence on the factors influencing the ex-post efficiency of insolvency regimes, especially those outside of the United States, is scant (Hotchkiss et al 2008: 38, Blazy et al 2011, 2013: 1937Sundgren 1998, Couwenberg and de Jong 2008, Dewaelheyns and Van Hulle 2009, Leyman et al 2011 Systematic empirical analyses of bankruptcy regimes are especially scarce in the context of postsocialist and emerging-market economies (e.g., Blazy and Stef 2015, Lambert-Mogiliansky et al 2007, Vukelic et al 2014, Knot and Vychodil 2006, even though the design of effective bankruptcy institutions and procedures was identified as a policy priority during transition (see, e.g., Aghion et al 1994, Estrin 2000, Pistor 2000, Csaki 2002) and continues to be an important 1 In contrast, the literature on the ex-ante incentive effects of bankruptcy has been comparatively voluminous (for references, see, e.g., Hotchkiss et al 2008: fn.…”

Section: Introductionmentioning

confidence: 99%

“…In this paper, we fill the abovementioned gap in the literature by studying the determinants of debt recovery, a common measure of ex-post efficiency of insolvency proceedings (see, e.g., Blazy and Stef 2015, 2013Thorburn 2000, Couwenberg and de Jong 2008, Armour et al 2008, in firm liquidations in the post-socialist EU member state of Slovenia. Scarce previous micro-level studies on the predictors of debt recovery have examined the importance of bankruptcy laws (see, e.g., Armour et al 2008, Davydenko and Franks 2008, Haselmann et al 2010, Blazy et al 2013Blazy and Stef 2015) and utilized crosscountry variation in the applicable codes and procedures (e.g., Davydenko and Franks 2008, Haselmann et al 2010, Blazy et al 2013, Blazy and Stef 2015.…”

Section: Introductionmentioning

confidence: 99%

“…Scarce previous micro-level studies on the predictors of debt recovery have examined the importance of bankruptcy laws (see, e.g., Armour et al 2008, Davydenko and Franks 2008, Haselmann et al 2010, Blazy et al 2013Blazy and Stef 2015) and utilized crosscountry variation in the applicable codes and procedures (e.g., Davydenko and Franks 2008, Haselmann et al 2010, Blazy et al 2013, Blazy and Stef 2015. We, in contrast, much like Armour et al (2008) or rely on a within-country research design, but focus on the thus far empirically unexplored role of liquidation trustees as the agents delegated the execution of insolvency procedures in the resolution of firm liquidation cases.…”

Section: Introductionmentioning

confidence: 99%

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Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Insolvency systems play a crucial role in protection of creditor rights, yet micro-level empirical evidence on the functioning of insolvency regimes worldwide is sparse. We investigate whether creditors' recovery of outstanding claims, a measure of ex-post efficiency of an insolvency regime, depends on the characteristics of the trustee delegated the administration of the liquidation proceedings. To this end, we draw on a novel dataset of firm liquidations from Slovenia and exploit courts' de facto random assignment of firm liquidation cases to licensed liquidation trustees. Using a wide range of specifications and controls, we find that a subset of trustee characteristics indeed matters for debt recovery. Thus, ex-post efficiency of an insolvency regime depends not only on its formal rules and procedures, but also on who implements them in practice. Terms of use: Documents inJEL-Codes: G330, K220, P370.

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Section: Introductionsupporting

confidence: 65%

Section: Outcome Variablementioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?

2016

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Bankruptcy and the difficulty of firing

Stef

2018

International Review of Law and Economics

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Firms may use layoffs as an ex ante mechanism to avoid filing for bankruptcy.However, the national labor law may impose some restrictions that delay or hamper the firing decision of the employer. This study proposes a different legal pathway for policymakers whose goal is to reduce the use of bankruptcy without acting on the design of the bankruptcy law. Using a sample of 33 countries from 2007 to 2015, we show that the total amount of firing restrictions leads to more bankruptcies. The employer's legal obligation to notify a third party prior the dismissal of one employee tends to increase the number of bankruptcies. It is very likely that the employer's rescue strategy endures an intense ex post monitoring of the employment contracts and/or a strong legal opposition to the layoff decision from such third party. In addition, labor codes that apply priority rules in case of reemployment can increase the use of bankruptcy.

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Trade Credit and Industry Dynamics: Evidence from Trucking Firms

Barrot

2016

The Journal of Finance

265

129

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Long payment terms are a strong impediment to the entry and survival of liquidity constrained firms. To test this idea and its implications, I consider the effect of a reform restricting the trade credit supply of French trucking firms. In a difference-in-differences setting, I find that trucking firms' corporate default probability drops by one-fourth following the restriction. The effect is persistent, concentrated among liquidity constrained firms, and not offset by a drop in profits. The restriction also triggers an increase in the entry of small trucking firms.JEL classification: G32, G33, G34, D23 * MIT Sloan School of Management. Email: jnbarrot@mit.edu. I am indebted to Antoinette Schoar and David Thesmar for their invaluable guidance and support. I am grateful to Michael Roberts (the editor) as well as two anonymous referees for their suggestions. I thank Francois Derrien, Laurent Fresard, Denis Gromb, Uli Hege, Augustin Landier, Clemens Otto, and Mitchell Petersen for their very helpful comments in the early stages of this project. I am deeply grateful to Claire Lelarge for her insights and assistance with the data. This work also benefited greatly from conversations with Pol Antras, Adrien Auclert, Arnaud Costinot, Fritz Foley, and from the suggestions of seminar participants at the University of Zurich, Wharton, Berkeley Haas, MIT Sloan, Harvard Business School, Yale SOM, Kellogg, Chicago Booth, UNC Kenan-Flager, Fisher College at Ohio State University, Stanford GSB, ESSEC, Cornell, Dartmouth, Duke, Princeton, and Brigham Young University. All remaining errors are my own. I acknowledge support from the AXA Research Fund and the HEC Paris Foundation.Nonfinancial firms are the main providers of short-term corporate financing to their customers.Accounts payable are three times as large as bank loans and fifteen times as large as commercial paper on the aggregate balance sheet of nonfinancial U.S. businesses. 1 Moreover, interfirm lending finances a disproportionate share of global trade. 2 Yet despite its economic significance, trade credit supply has received little attention relative to firms' other financial and real activities, mainly due to the lack of appropriate empirical setting. 3 In particular, the implications of trade credit provision for firms' corporate liquidity remain poorly understood.While financially stronger firms can extend trade credit to their customers in the form of long payment terms, their financially weaker rivals might expose themselves to liquidity shocks by doing so. Depending on the intensity of competition, they might not be able to pass this excess liquidity risk onto prices. Long payment terms extended by financially stronger firms might thus prevent their constrained rivals from entering, expanding, and surviving in the industry. The main challenge in identifying this mechanism is that firms compete on many dimensions, and that financially stronger firms might have other comparative advantages over their constrained competitors.To solve this identification cha...

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Building Legal Indexes to Explain Recovery Rates: An Analysis of the French and English Bankruptcy Codes

Cited by 5 publications

References 24 publications

Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?

Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?

Bankruptcy and the difficulty of firing

Trade Credit and Industry Dynamics: Evidence from Trucking Firms

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