Firms’ performance under different bankruptcy systems: a Europe–USA empirical analysis

In this paper, we review the history of scholarly finance research in the Asia Pacific Basin. We do this by analysing the four leading regional finance journals -Accounting and Finance, Australian Journal of Management, International Review of Finance and the Pacific-Basin Finance Journalalong five dimensions. The five dimensions are the most cited papers, noted authors, impact in terms of practice, research areas and a breakdown in terms of the development of the field according to Kuhnian concepts of normal science, anomalies and extraordinary science. We show that the Asia Pacific journals make a crucial contribution to research and practice both in the region and internationally.

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“…Gutierrez et al . () provide an international study of the effect of alternative bankruptcy systems on firm performance. Chang et al .…”

Section: Relevance To Practicementioning

confidence: 99%

Fifty years of finance research in the Asia Pacific Basin

Benson

Faff

Smith

2014

Accounting & Finance

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“…On the one hand, it might be relevant if firms follow an informal procedure or file for bankruptcy (Aybar Arias et al, 2006;Gilson, 1997;González and González, 2000). On the other hand, firms filing for bankruptcy are affected by different insolvency procedures, because bankruptcy laws vary across countries (Davydenko and Franks, 2008;López Gutiérrez et al, 2012).…”

Section: Discussionmentioning

confidence: 99%

“…On the one hand, Davydenko and Franks (2008) and Qian and Strahan (2007) find that the characteristics of bankruptcy laws are a determining factor of financial institutions' behavior upon financing each country's firms (it affects recovery rates, the maturity of transactions and the collateral required). On the other hand, the orientation of the bankruptcy laws (debtor or creditor oriented) may lead to suboptimal investment decisions (López Gutiérrez et al, 2012). These investment problems may be behind the low recovery capacity that the different restructuring procedures presented (Couwenberg, 2001), as well as the loss of value of companies in distress (López Gutiérrez et al, 2009).…”

Section: Theory and Testable Hypothesesmentioning

confidence: 99%

Investment decisions of companies in financial distress

López-Gutiérrez

Azofra

Torre-Olmo

2015

BRQ Business Research Quarterly

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This paper analyzes the influence of financial distress on the investment behavior of companies. The analysis includes companies from Germany, Canada, Spain, France, Italy, UK and USA, which cover a wide spectrum of different institutional environments. The methodology used is panel data estimation using the Generalized Method of Moments (System-GMM), thereby allowing control of both unobservable heterogeneity and the problems of endogeneity in explanatory variables. The results show that the influence of financial distress on investment is different according to the investment opportunities available to companies. So, companies in difficulties with fewer opportunities have the greatest propensity to under-invest, while firms in difficulties with better opportunities do not present different investment behavior than healthy companies.

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“…It should have no effect once the firm's viability and prospects are controlled for. Many kinds of sectorial variables are used, either market-wide -such as in Partington andKim (2008) or in Hoi Fung Ng (2007); or industry-wide such as in Ayadi-Ben Lakhal (2011) or even economic-wide such as in Gutiérrez, Olmo, and Azofra (2012). None of the papers add a geographical concern to these variables.…”

Section: Bankruptcy Outcome Decisions In the Literaturementioning

confidence: 99%

How Do Judges Judge? Evidence of Local Effect on French Bankruptcy Judgments

Esquerre

2014

SSRN Journal

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Courts must audit and then screen out viable but failing firms after their filing for bankruptcy. Yet the judgment and its decision process remain a black box. The bankruptcy literature claims it is an optimal arbitrage between the going concern and the liquidation value. Deviations from the efficient judgment should be mainly explained because of the characteristics of the legal system through its tradition or its orientation. The main concern of the literature is to determine how these characteristics affect the efficiency of the decision. The aim of this paper is to challenge these models and to consider another factor, the local environment. The paper switches from the usual perspective and focuses on the Courts rather than on the legal system. It assumes this institution takes into account the local unemployment rate to decide whether a firm should survive or not. Possible explanations by the bankruptcy literature are tested-rational behavior, the firms are more viable when there is an increase of local unemployment rate; strict application of national orientation, the effect is drawn by national economic climate; over-interpretation of law, judges try to promote social efficiency in their decisions; or another explanation, a behavioral bias due to political beliefs or network issues. The analysis is based an original dataset of all Redressement Judiciaire-French main continuation proceeding-since 2006. Through several tests-using survival analysis in a competing risk setting, the paper assesses only the behavioral bias seems to hold. It underlines that Courts are locally embedded institutions which protect the firms under their jurisdiction against local turmoil. This effect is found to be detrimental on the survival of these prolonged firms.

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Firms’ performance under different bankruptcy systems: a Europe–USA empirical analysis

Cited by 21 publications

References 58 publications

Fifty years of finance research in the Asia Pacific Basin

Fifty years of finance research in the Asia Pacific Basin

Investment decisions of companies in financial distress

How Do Judges Judge? Evidence of Local Effect on French Bankruptcy Judgments

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