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Institutional Complementarities within Corporate Governance Systems: A Comparative Study of Bankruptcy Rules

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  • Christine Pochet

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    Abstract

    Recent research work has put forward theconcept of “national system of corporate governance” to describe the complex architecture of legal rules, economic mechanisms and mentalities which constrain managerial discretion in a different way according to the country considered. The role played by the legal system in this set of mechanisms is particularly important and, as part of the legal system, the bankruptcy law performs a specific function: designed as a governance device for financially distressed firms, it also acts as a monitoring mechanism for healthy ones. The aim of this paper is to investigate the mechanisms of corporate governance in the context of bankruptcy in a comparative perspective. Relying on a broad definition of corporate governance (i.e., one which takes into account the influence of all stakeholders on managerial discretion), we first examine the insolvency codes of five countries (France, Germany, Japan, the United Kingdom and the United States). The stance of the law (creditor-oriented vs. debtor-oriented) is discussed in relation to the legal tradition of each country. We then study the way bankruptcy law in each country articulates with the other governance mechanisms. For that purpose, a typology of those mechanisms is used, based on the type of device each kind of stakeholder is able to activate. Results of both theoretical and empirical studies on bankruptcy are used to understand which of the different devices are used in each country. The comparative approach underlines the impact of institutional differences on organizations through the incentives sent to their stakeholders. Copyright Kluwer Academic Publishers 2002

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    File URL: http://hdl.handle.net/10.1023/A:1021219200695
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    Bibliographic Info

    Article provided by Springer in its journal Journal of Management and Governance.

    Volume (Year): 6 (2002)
    Issue (Month): 4 (December)
    Pages: 343-381

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    Handle: RePEc:kap:jmgtgv:v:6:y:2002:i:4:p:343-381

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    Web page: http://www.springerlink.com/link.asp?id=102940

    Related research

    Keywords: Bank-oriented systems; Bankruptcy law; Comparative corporate governance; Institutional complementarities; Market-oriented systems; National system of corporate governance; Stakeholders;

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    Cited by:
    1. Brunner, Antje & Krahnen, Jan Pieter, 2004. "Multiple Lenders and Corporate Distress: Evidence on Debt Restructuring," CEPR Discussion Papers 4287, C.E.P.R. Discussion Papers.

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