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The Leniency of Personal Bankruptcy Regulations in the EU Countries

Author

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  • György Walter

    (Department of Finance, Corvinus University of Budapest, Fővám tér 8, 1093 Budapest, Hungary)

  • Jens Valdemar Krenchel

    (Department of Finance, Corvinus University of Budapest, Fővám tér 8, 1093 Budapest, Hungary)

Abstract

Discussions on personal bankruptcy regulations are usually focused on the controversial effects of leniency on society, economy, financial markets, entrepreneurship, and labour supply. However, the methodology of measuring leniency has been limited to one-time legislative changes or some elements of the US personal bankruptcy system. In contrast, we create a composite index of personal bankruptcy legislations. We calculate the composite index for 25 EU countries and the US as a benchmark, validate the results, and rank the countries according to the leniency of their personal bankruptcy systems. We analyse the index scores by region, law origin, and the age of the regime. We conclude that the systems show high heterogeneity and cannot be clustered by region or legal origin assumed based on former studies. However, there is a strong association between leniency and the age of legislation. Results indicate that personal bankruptcy policies in the EU are usually launched as creditor-friendly and are later shifted to a more lenient direction.

Suggested Citation

  • György Walter & Jens Valdemar Krenchel, 2021. "The Leniency of Personal Bankruptcy Regulations in the EU Countries," Risks, MDPI, vol. 9(9), pages 1-20, September.
    • Handle: RePEc:gam:jrisks:v:9:y:2021:i:9:p:162-:d:630125
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    References listed on IDEAS

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    Cited by:

    1. N. Luotonen & V. Puttonen & E. Rantapuska, 2022. "Ability, Educational Attainment, and Household Financial Distress," Journal of Consumer Policy, Springer, vol. 45(4), pages 655-672, December.
    2. Rafał Balina & Marta Idasz-Balina, 2021. "Drivers of Individual Credit Risk of Retail Customers—A Case Study on the Example of the Polish Cooperative Banking Sector," Risks, MDPI, vol. 9(12), pages 1-26, December.

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