Bankruptcy law and credit market: a general-equilibrium approach
AbstractThis study has as its main objective to analyze the best bankruptcy procedure considering the conflict of interests between managers, secured creditors and trade creditors. Such trade-off is strictly connected with industry and countries characteristics, which is also relevant to the design of the bankruptcy law. Simulating a general-equilibrium model with incomplete marktes and bankruptcy, we show that for liquidation procedure that does not depreciates the failed assets too much, bankruptcy-liquidation produces better economic results for sectors intensive in physical capital. As the depreciation in liquidation increases and/or the industry sectors are less intensive in physical capital, the availability of reorganization produces better economic results. Using data of 44 countries, our results points that approximately 60% of the countries in the sample apply a procedure aligned with our suggestions.
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Bibliographic InfoPaper provided by Fucape Business School in its series Fucape Working Papers with number 39.
Length: 19 pages
Date of creation: Mar 2013
Date of revision:
Publication status: Published in Fucape Working Papers, Março 2013
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Bankruptcy; Legal System; Credit;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-03-30 (All new papers)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Maria Brouwer, 2006. "Reorganization in US and European Bankruptcy law," European Journal of Law and Economics, Springer, vol. 22(1), pages 5-20, July.
- Aloisio Araujo & Bruno Funchal, 2005. "Bankruptcy Law in Latin America: Past and Future," JOURNAL OF LACEA ECONOMIA, LACEA - LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION.
- Povel, Paul, 1999. "Optimal "Soft" or "Tough" Bankruptcy Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 659-84, October.
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