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Can Bankruptcy Codes Create Value? Evidence from Creditors’ Recoveries in France, Germany, and the UK

Author

Listed:
  • Régis Blazy

    (LaRGE Research Center, Université de Strasbourg)

  • Joël Petey

    (LaRGE Research Center, Université de Strasbourg)

  • Laurent Weill

    (LaRGE Research Center, Université de Strasbourg)

Abstract

The aim of this paper is to provide new evidence on the value-creation process taking place in bankruptcy procedures that belong to different legal systems (French civil law, German civil law, and common law): to do so, we assess to which extent the debtor’s value can be preserved under bankruptcy by analyzing the recovery rates in France, Germany, and the United Kingdom. We use a unique European sample of 900 corporate bankruptcy files that were manually collected in commercial courts on the period 1993-2005. We also contribute to the literature by considering the recovery rates on the various classes of claimants (senior claims, junior claims, and new money) for each bankruptcy procedure. Our main conclusions are: (a) France and Germany show quite similar global recovery rates which are greater than in the UK, (b) when controlling for the quality of assets at the beginning of the procedure and for the structure of claims, we observe that recovery rates are not significantly different between France and the UK, while they remain greater for German companies, (c) Germany has the greatest recovery rates for senior and junior creditors, (d) the reorganization procedure and the liquidation procedure leading to the highest global recovery rate are, respectively, the French continuation and the German liquidation.

Suggested Citation

  • Régis Blazy & Joël Petey & Laurent Weill, 2010. "Can Bankruptcy Codes Create Value? Evidence from Creditors’ Recoveries in France, Germany, and the UK," Working Papers of LaRGE Research Center 2010-11, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2010-11
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    Citations

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    Cited by:

    1. Marco Bisogno, 2012. "The Accessibility Of The Italian Bankruptcy Procedures: An Empirical Analysis," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 2(2), pages 1-24, December.
    2. Blazy, Régis & Letaief, Aziza, 2017. "When secured and unsecured creditors recover the same: The emblematic case of the Tunisian corporate bankruptcies," Emerging Markets Review, Elsevier, vol. 30(C), pages 19-41.
    3. Tatiana Škerlíková, 2012. "Findings from Literature Review with Focus on the Law Influence on Bankruptcy Initiation [Poznatky ze studia literatury zabývající se vlivem právní úpravy na zahájení insolvenčního řízení]," Český finanční a účetní časopis, Prague University of Economics and Business, vol. 2012(4), pages 120-131.
    4. Annabi, Amira & Breton, Michèle & François, Pascal, 2012. "Game theoretic analysis of negotiations under bankruptcy," European Journal of Operational Research, Elsevier, vol. 221(3), pages 603-613.
    5. Cesar Tamayo, 2015. "Investor protection and optimal contracts under risk aversion and costly state verification," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 59(3), pages 547-577, August.

    More about this item

    Keywords

    Bankruptcy; Recovery Rates.;

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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