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Bankruptcy Law in Latin America: Past and Future

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  • Aloisio Araujo

    ()

  • Bruno Funchal

    ()

Abstract

This paper studies bankruptcy law in Latin America, focusing on the Brazilian reform. We start with a review of the international literature on this subject. Next we examine the economic incentives associated with several aspects of bankruptcy laws and insolvency procedures in general, as well as the trade-offs involved. We follow this theoretical discussion with an empirical evaluation of the quality of current insolvency procedures in Latin America. We find that the region is governed by a set of laws that is inefficient even when compared with regions of lower per capita income. This inefficiency has severe consequences for credit markets and the cost of capital. Next we focus on the recent Brazilian bankruptcy reform, analyzing its main components and possible effects. The appendix describes difficulties of the reform process in Brazil and lessons other Latin American countries can learn from it.

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Bibliographic Info

Article provided by LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION in its journal JOURNAL OF LACEA ECONOMIA.

Volume (Year): (2005)
Issue (Month): ()
Pages:

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Handle: RePEc:col:000425:008657

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Keywords: Bankruptcy; Financial Distress; Legal System; Law and Economics;

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Cited by:
  1. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series, Central Bank of Brazil, Research Department 324, Central Bank of Brazil, Research Department.
  2. Araujo, Aloisio P. & Ferreira, Rafael V.X. & Funchal, Bruno, 2012. "The Brazilian bankruptcy law experience," Journal of Corporate Finance, Elsevier, Elsevier, vol. 18(4), pages 994-1004.
  3. Bruno Funchal & Aloisio Araujo, 2007. "A Nova Lei De Falências Brasileira: Primeiros Impactos," Anais do XXXV Encontro Nacional de Economia [Proceedings of the 35th Brazilian Economics Meeting], ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Gr 079, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics].
  4. Antunes, António & Cavalcanti, Tiago & Villamil, Anne, 2008. "The effect of financial repression and enforcement on entrepreneurship and economic development," Journal of Monetary Economics, Elsevier, Elsevier, vol. 55(2), pages 278-297, March.
  5. Nelson Souza-Sobrinho, 2010. "Macroeconomics of bank interest spreads: evidence from Brazil," Annals of Finance, Springer, Springer, vol. 6(1), pages 1-32, January.
  6. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2011. "Macroprudential Regulation and the Monetary Transmission Mechanism," Working Papers Series, Central Bank of Brazil, Research Department 254, Central Bank of Brazil, Research Department.
  7. Aloisio Araujo & Bruno Funcha, 2013. "Bankruptcy law and credit market: a general-equilibrium approach," Fucape Working Papers, Fucape Business School 39, Fucape Business School.

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