Corporate insolvency procedures in England: the uneasy case for liquidations

Abstract

Our paper investigates a comprehensive sample of 574 English corporate insolvency cases, including direct liquidation cases. In contrast to other insolvency procedures, liquidations perform poorly on average and fail to produce satisfactory repayments to creditors. We run multinomial Logit regressions to explain the choice between liquidation and reorganization. We obtain three main results. First, we confirm that size matters: distressed firms owning low assets have higher chances of being liquidated immediately. Second, the presence of secured creditors decreases the risk of direct liquidation. This provides a clue that in England, the most-informed creditors adapt their strategies and turn away from the less-performing procedures. Third, we find that the likelihood of administrationwhich appears nowadays as the main alternative to direct liquidation-significantly depends on the proportion of fixed/current assets owned by the firms.

Business Continuity in Times of Distress: Debt Restructuring Agreements and Compositions with Creditors in Italy

“…Even conditioning on a wide set of variables, composed of pre-determined procedure and firm characteristics, firm size is a strong predictor of a firm entering a DRA rather than a CC (see Table A.3 in the Appendix). A strand of empirical literature shows, in a US context, that large firms are more likely to seek restructuring compared to liquidation (e.g., see Bris et al, 2006;Corbae and D'Erasmo, 2017;Blazy and Nigam, 2019). While in this paper we compare two forms of restructuring that do not aim at liquidating the firm, one should keep in mind that DRAs are considered as a 'lighter'…”

The impact of board of directors’ characteristics on financial distress: Empirical evidence from Egypt using logit and discriminant analysis models.

“…This conclusion is in line with Elloumi and Gueyie (2001). However it varies with some other studies such as Wang and Deng (2006) As it shows clearly from table (11), all the control variables have a significant impact on financial distress. Financial leverage has a negative impact while the other control variables have a positive impact.…”

“…All the variables included in the model appear to be significant. According to table (11) CEO duality has a significant and positive impact on financial distress which means that we should accept hypothesis 1 stating that "The CEO duality is positively associated with financial distress". This result is in line with some previous research such as Daily and Dalton (1994), Simpson and Gleason (1999) and Wang and Deng (2006) and varies with Simpson and Gleason (1999) which reveals negative influence between CEO duality and financial distress.…”

“…The regression coefficients for the variables in the model, whether control variables or explanatory variables, are shown in table 11. All the variables included in the model appear to be significant.…”

The legal restructuring framework in Poland: Does it help indebted enterprises avoid bankruptcy?

“…8 Blazy and Nigam have revealed that liquidation procedures in England fail to produce satisfactory repayments to creditors, but in turn, procedures that do not aim at direct liquidation (administration and receivership) leading to higher recovery rates. 9 Insolvency legislation in Spain despite giving different solutions to keep the business as a going concern still characterises by low bankruptcy rates. Spanish companies prefer to use foreclosure (informal debt restructuring) rather than file for bankruptcy.…”