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Court-supervised Restructuring: Pre-bankruptcy Dynamics, Debt Structure and Debt Rescheduling

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Author Info

  • B. LEYMAN

    ()

  • K. SCHOORS

    ()

  • P. COUSSEMENT

    ()

Abstract

We analyze the debt dynamics of corporations that reorganize under Belgian court-supervised restructuring, using a unique sample of small corporations. Small firms systematically accumulate unsecured trade credit and unpaid taxes and social contributions in the running up to bankruptcy-reorganization. First, small firms accumulate overdue taxes and social contributions, pushing the government administration in the unintended role of lender of last resort during the pre-bankruptcy period. Second, we find that the pecking order theory and specific trade credit theories predict the levels of trade credit accumulated during the pre-bankruptcy period very well. Our findings suggest that pre-bankruptcy dynamics strongly affect the debt structure at the moment of initiation of the procedure and in this way the ultimate outcome of the restructuring process.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 08/507.

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Length: 45 pages
Date of creation: Apr 2008
Date of revision:
Handle: RePEc:rug:rugwps:08/507

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Keywords: court-supervised reorganization; bankruptcy; pecking order theory;

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References

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Cited by:
  1. Balcaen, S. & Manigart, S. & Ooghe, H., 2009. "From Distress to exit: determinants of the time to exit," Vlerick Leuven Gent Management School Working Paper Series 2009-12, Vlerick Leuven Gent Management School.
  2. B. Singh Gill, 2012. "Is accounts-receivable industry-specific or firm-specific?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/784, Ghent University, Faculty of Economics and Business Administration.

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