IDEAS home Printed from https://ideas.repec.org/p/lar/wpaper/2019-07.html
   My bibliography  Save this paper

The CV effect: How far do the chances to reorganize depend on the bankruptcy judges’ profile?

Author

Listed:
  • Régis BLAZY

    (LaRGE Research Center, Université de Strasbourg)

  • Stéphane ESQUERRE

    (Ministère de la Justice, France)

Abstract

This paper explores the linkage between the individual profiles of Parisian commercial judges with bankruptcy affairs they supervised between 2006-2012. We show that a “CV effect” prevails: the firms’ actual chances to reorganize after bankruptcy filing vary with the composition of the chambers. We also confirm the existence of a limited (but not marginal) appointment bias suggesting that the bankruptcy affairs are not fully randomized across judges. Several variables accounting for the judges’ profiles exert a significant influence on reorganization. First, the presence of female judges increases the chances of a successful plan. We find a similar influence of the judges’ managerial skills and of the highest academic profiles. Yet, a mismatch between the judges’ profiles (mostly oriented towards big businesses) and the firms (closer to SMEs) undermines the probability to reorganize. We also refined our analysis by focusing on the two main filters for reorganization: i) the decision to open an observation period, ii) the supervision of such period by juges commissaires. Overall, our approach provides useful elements of answer on how to reduce type 2 errors during the bankruptcy process. Our findings lead to normative recommendations in order to better align consular Justice with the litigants’ needs. The results on France can extend to other mixed consular systems.

Suggested Citation

  • Régis BLAZY & Stéphane ESQUERRE, 2019. "The CV effect: How far do the chances to reorganize depend on the bankruptcy judges’ profile?," Working Papers of LaRGE Research Center 2019-07, Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg.
    • Handle: RePEc:lar:wpaper:2019-07
    as

    Download full text from publisher

    File URL: http://ifs.u-strasbg.fr/large/publications/2019/2019-07.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Senbet, Lemma W. & Wang, Tracy Yue, 2012. "Corporate Financial Distress and Bankruptcy: A Survey," Foundations and Trends(R) in Finance, now publishers, vol. 5(4), pages 243-335, August.
    2. Lambert-Mogiliansky, Ariane & Sonin, Konstantin & Zhuravskaya, Ekaterina, 2007. "Are Russian commercial courts biased? Evidence from a bankruptcy law transplant," Journal of Comparative Economics, Elsevier, vol. 35(2), pages 254-277, June.
    3. repec:dau:papers:123456789/1711 is not listed on IDEAS
    4. Arturo Bris & Ivo Welch & Ning Zhu, 2006. "The Costs of Bankruptcy: Chapter 7 Liquidation versus Chapter 11 Reorganization," Journal of Finance, American Finance Association, vol. 61(3), pages 1253-1303, June.
    5. Bergstrom, Clas & Eisenberg, Theodore & Sundgren, Stefan, 2002. "Secured debt and the likelihood of reorganization," International Review of Law and Economics, Elsevier, vol. 21(4), pages 359-372, May.
    6. Couwenberg, Oscar, 2001. "Survival rates in bankruptcy systems : overlooking the evidence," Research Report 01E15, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    7. P. M. T. Broersen, 1986. "Subset Regression with Stepwise Directed Search," Journal of the Royal Statistical Society Series C, Royal Statistical Society, vol. 35(2), pages 168-177, June.
    8. Luc Marco & Michel Rainelli, 1986. "« Les disparitions de firmes industrielles en France : un modèle économétrique »," Revue d'Économie Industrielle, Programme National Persée, vol. 36(1), pages 1-13.
    9. Fisher, Timothy C G & Martel, Jocelyn, 1995. "The Creditors' Financial Reorganization Decision: New Evidence from Canadian Data," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 112-126, April.
    10. Clas Wihlborg & Shubhashis Gangopadhyay, 2001. "Infrastructure Requirements in the Area of Bankruptcy Law," Center for Financial Institutions Working Papers 01-09, Wharton School Center for Financial Institutions, University of Pennsylvania.
    11. Zorn, Christopher, 2005. "A Solution to Separation in Binary Response Models," Political Analysis, Cambridge University Press, vol. 13(2), pages 157-170, April.
    12. Lynn M. LoPucki & Joseph W. Doherty, 2004. "The Determinants of Professional Fees in Large Bankruptcy Reorganization Cases," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 1(1), pages 111-141, March.
    13. Blazy, Régis & Chopard, Bertrand & Fimayer, Agnès & Guigou, Jean-Daniel, 2011. "Employment preservation vs. creditors' repayment under bankruptcy law: The French dilemma?," International Review of Law and Economics, Elsevier, vol. 31(2), pages 126-141, June.
    14. Maria Brouwer, 2006. "Reorganization in US and European Bankruptcy law," European Journal of Law and Economics, Springer, vol. 22(1), pages 5-20, July.
    15. Nicolae Stef, 2017. "Voting Rules in Bankruptcy Law," Post-Print hal-01549783, HAL.
    16. Régis Blazy & Joël Petey & Laurent Weill, 2018. "Serving the creditors after insolvency filings: from value creation to value distribution," European Journal of Law and Economics, Springer, vol. 45(2), pages 331-375, April.
    17. Edward R. Morrison, 2007. "Bankruptcy Decision Making: An Empirical Study of Continuation Bias in Small-Business Bankruptcies," Journal of Law and Economics, University of Chicago Press, vol. 50(2), pages 381-419.
    18. Régis Blazy & Bertrand Chopard, 2012. "(Un)secured debt and the likelihood of court-supervised reorganization," European Journal of Law and Economics, Springer, vol. 34(1), pages 45-61, August.
    19. repec:dgr:rugsom:01e15 is not listed on IDEAS
    20. Chien-An Wang, 2012. "Determinants of the Choice of Formal Bankruptcy Procedure: An International Comparison of Reorganization and Liquidation," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(2), pages 4-28, March.
    21. Julian R. Franks & Kjell G. Nyborg & Walter N. Torous, 1996. "A Comparison of UK, US and German Insolvency Codes," Financial Management, Financial Management Association, vol. 25(3), Fall.
    22. White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-151, Spring.
    23. Soo Chew & Richard Ebstein & Songfa Zhong, 2012. "Ambiguity aversion and familiarity bias: Evidence from behavioral and gene association studies," Journal of Risk and Uncertainty, Springer, vol. 44(1), pages 1-18, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Blazy, Régis & Esquerré, Stéphane, 2021. "The CV effect: To what extent does the chance to reorganize depend on a bankruptcy judge’s profile?," International Review of Law and Economics, Elsevier, vol. 66(C).
    2. Régis Blazy & Joël Petey & Laurent Weill, 2018. "Serving the creditors after insolvency filings: from value creation to value distribution," European Journal of Law and Economics, Springer, vol. 45(2), pages 331-375, April.
    3. Régis Blazy & Nirjhar Nigam, 2019. "Corporate insolvency procedures in England: the uneasy case for liquidations," European Journal of Law and Economics, Springer, vol. 47(1), pages 89-123, February.
    4. Dewaelheyns, Nico & Van Hulle, Cynthia, 2009. "Filtering speed in a Continental European reorganization procedure," International Review of Law and Economics, Elsevier, vol. 29(4), pages 375-387, December.
    5. Jaka Cepec & Peter Grajzl & Katarina Zajc, 2016. "Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?," Quaderni del Dipartimento di Economia, Finanza e Statistica 24/2016, Università di Perugia, Dipartimento Economia.
    6. Régis Blazy & Nicolae Stef, 2020. "Bankruptcy procedures in the post-transition economies," European Journal of Law and Economics, Springer, vol. 50(1), pages 7-64, August.
    7. Cepec, Jaka & Grajzl, Peter, 2020. "Debt-to-equity conversion in bankruptcy reorganization and post-bankruptcy firm survival," International Review of Law and Economics, Elsevier, vol. 61(C).
    8. Nicolae Stef, 2023. "Bankruptcy voting process and corporate reorganization," Bulletin of Economic Research, Wiley Blackwell, vol. 75(2), pages 508-524, April.
    9. Jaka Cepec & Peter Grajzl & Katarina Zajc, 2016. "Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?," CESifo Working Paper Series 6034, CESifo.
    10. 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.
    11. Carmen Vargas Pérez & Juan Luis Peñaloza Figueroa, 2017. "Big Data and the Demand for Court and Legal Services," European Journal of Interdisciplinary Studies Articles, Revistia Research and Publishing, vol. 3, September.
    12. Blazy, Régis & Chopard, Bertrand & Fimayer, Agnès & Guigou, Jean-Daniel, 2011. "Employment preservation vs. creditors' repayment under bankruptcy law: The French dilemma?," International Review of Law and Economics, Elsevier, vol. 31(2), pages 126-141, June.
    13. Blazy, Régis & Chopard, Bertrand & Nigam, Nirjhar, 2013. "Building legal indexes to explain recovery rates: An analysis of the French and English bankruptcy codes," Journal of Banking & Finance, Elsevier, vol. 37(6), pages 1936-1959.
    14. Régis Blazy & Bertrand Chopard & Agnès Fimayer & Jean-Daniel Guigou, 2007. "Financial versus Social Efficiency of Corporate Bankruptcy Law: the French Dilemma?," LSF Research Working Paper Series 07-02, Luxembourg School of Finance, University of Luxembourg.
    15. Leyman, Bart & Schoors, Koen J.L. & Coussement, Peter, 2011. "Does court-supervised reorganization work? Evidence from post-confirmation firm failure," International Review of Law and Economics, Elsevier, vol. 31(3), pages 149-168, September.
    16. Srhoj, Stjepan & Kovač, Dejan & Shapiro, Jacob N. & Filer, Randall K., 2023. "The impact of delay: Evidence from formal out-of-court restructuring," Journal of Corporate Finance, Elsevier, vol. 78(C).
    17. Stéphane Esquerré, 2019. "How do judges judge? Evidence of local effect on French bankruptcy judgments," Working Papers hal-02291688, HAL.
    18. Blazy, Régis & Martel, Jocelyn & Nigam, Nirjhar, 2014. "The choice between informal and formal restructuring: The case of French banks facing distressed SMEs," Journal of Banking & Finance, Elsevier, vol. 44(C), pages 248-263.
    19. Goodwin, John & Routledge, James, 2021. "Determinants of the duration of the voluntary administration process: An unconditional quantile regression analysis," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).
    20. Bart Leyman, 2012. "The uneasy case for rehabilitating small firms under the 1997-reorganization law in Belgium: evidence from reorganization plans," European Journal of Law and Economics, Springer, vol. 34(3), pages 533-560, December.

    More about this item

    Keywords

    Bankruptcy; Reorgnization; Consular Justice; Commercial Court; Judges; CV;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:lar:wpaper:2019-07. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Christophe J. Godlewski (email available below). General contact details of provider: https://edirc.repec.org/data/lastrfr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.