Capture of Bankruptcy: Theory and Evidence from Russia
AbstractLaws that work well in a rule-of-law country may produce unexpected outcomes in a corrupt environment. We argue that the legal system in Russia is faulted by the capture of regional divisions of arbitrage courts. We analyse the consequences of this for the efficiency of Russian bankruptcy law. Using a theoretical model and a systematic analysis of available evidence, we conclude the following: First, the governors in alliance with managers of large regional enterprises use bankruptcy institution as a mechanism for effective expropriation of the federal government and the outside investors. And second, the bankruptcy law does not create pressure on managers to restructure; instead, it may even prevent restructuring.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2488.
Date of creation: Jun 2000
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Find related papers by JEL classification:
- D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
- H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
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