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Capture of Bankruptcy: Theory and Russian Evidence

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Author Info

  • Ariane Lambert-Mogiliansky

    (CERAS-ENPC)

  • Konstantin Sonin

    ()
    (New Economic School/CEFIR and CEPR)

  • Ekaterina Zhuravskaya

    ()
    (CEFIR and CEPR)

Abstract

Laws that work well in developed market economies may produce unexpected outcomes in a corrupt environment. The paper argues that the Russian legal system is impaired by the capture of regional arbitration courts and analyzes the consequences of this capture for functioning of bankruptcy institution in the late 1990s. A model of strategic interaction among main stakeholders generates the following results. First, governors and managers of large regional enterprises colluded to use bankruptcy procedure as a mechanism of expropriation of the federal government’s revenues and claims of outside investors. Second, the bankruptcy law did not put pressure on managers to restructure; instead, the law could have prevented restructuring even when managers wanted to do so. Empirical analysis substantiates the theoretical findings and shows that regional political factors were important in explaining implementation of the 1998 Russia’s bankruptcy law.

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Bibliographic Info

Paper provided by Center for Economic and Financial Research (CEFIR) in its series Working Papers with number w0038.

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Length: 35 pages
Date of creation: Jun 2003
Date of revision:
Handle: RePEc:cfr:cefirw:w0038

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References

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Citations

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Cited by:
  1. Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
  2. Leonid POLISHCHUK, 2008. "Misuse of Institutions: Patterns and Causes," The Journal of Comparative Economic Studies (JCES), The Japanese Society for Comparative Economic Studies (JSCES), vol. 4, pages 57-80, December.
  3. Zakolyukina Anastasia, 2006. "Bankrtuptcy in Russia: External Management Performance," EERC Working Paper Series 06-09e, EERC Research Network, Russia and CIS.
  4. Tuuli Juurikkala & Olga Lazareva, 2004. "To Divest or not to Divest? Social Assets in Russian Firms," ERSA conference papers ersa04p637, European Regional Science Association.
  5. Dilip Mookherjee & Pranab Bardhan, 2005. "Decentralization, Corruption And Government Accountability: An Overview," Boston University - Department of Economics - Working Papers Series WP2005-023, Boston University - Department of Economics, revised Jun 2005.
  6. Juurikkala, Tuuli & Lazareva, Olga, 2006. "Non-wage benefits, costs of turnover, and labor attachment: Evidence from Russian firms," BOFIT Discussion Papers 4/2006, Bank of Finland, Institute for Economies in Transition.
  7. Sonin Konstantin, 2004. "Private interest in public tenders: no revenue, no efficiency and no social benefits," EERC Working Paper Series 00-111e, EERC Research Network, Russia and CIS.
  8. Pertti Haaparanta & Tuuli Juurikkala & Olga Lazareva & Ekaterina Zhuravskaya & Jukka Pirttilä & Laura Solanko, 2004. "Firms and public service provision in Russia," Macroeconomics 0401015, EconWPA.
  9. Ponomareva, Maria & Zhuravskaya, Ekaterina, 2004. "Federal Tax Arrears in Russia: Liquidity Problems, Federal Redistribution or Russian Resistance?," CEPR Discussion Papers 4267, C.E.P.R. Discussion Papers.
  10. Irina Slinko & Evgeny Yakovlev & Ekaterina Zhuravskaya, 2004. "Laws for Sale: Evidence from Russia," Economics Working Papers 0046, Institute for Advanced Study, School of Social Science.
  11. Solanko, Laura, 2006. "Coping with missing public infrastructure: An analysis of Russian industrial enterprises," BOFIT Discussion Papers 2/2006, Bank of Finland, Institute for Economies in Transition.

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