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The Economics of Bankrupcy, Reorganisation and Liquidation: Lessons for East European Transitional Economies

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  • Iraj Hashi

Abstract

The purpose of this paper is to analyse the economic implications of the bankruptcy procedures in Western market economies with a view to draw appropriate lessons for the transitional economies of Central and Eastern Europe. In Section II, we shall discuss the bankruptcy procedures in four major market eocnomies, emphasising the conditions under which the financially distressed firms are reorganised or liquidated. Section III focuses on the relative efficacy of the 'reorganisation' option in comparison with the 'liquidation' option of the bankruptcy procedures. Section IV highlights the lessons that East European transitional economies may learn from the experience of market economies, drawing attention to a number of important areas of concern in any discussion of the design and implementation of bankruptcy procedures.

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File URL: http://www.case-research.eu/upload/publikacja_plik/3459482_041.pdf
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Bibliographic Info

Paper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0041.

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Length: 30 Pages
Date of creation: 1995
Date of revision:
Handle: RePEc:sec:cnstan:0041

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Keywords: Eastern Europe; transition; bankrupcy; reorganisation; liquidation;

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  1. Gilson, Stuart C. & John, Kose & Lang, Larry H. P., 1990. "Troubled debt restructurings*1: An empirical study of private reorganization of firms in default," Journal of Financial Economics, Elsevier, vol. 27(2), pages 315-353, October.
  2. Guffey, Daryl M & Moore, William T, 1991. "Direct Bankruptcy Costs: Evidence from the Trucking Industry," The Financial Review, Eastern Finance Association, vol. 26(2), pages 223-35, May.
  3. Aghion, P. & Hart, O. & Moore, J., 1992. "The Economics of Bankruptcy Reform," Working papers 92-11, Massachusetts Institute of Technology (MIT), Department of Economics.
  4. van Wijnbergen, Sweder, 1994. "On the Role of Banks in Enterprise Restructuring: The Polish Example," CEPR Discussion Papers 898, C.E.P.R. Discussion Papers.
  5. Franks, Julian R & Torous, Walter N, 1989. " An Empirical Investigation of U.S. Firms in Reorganization," Journal of Finance, American Finance Association, vol. 44(3), pages 747-69, July.
  6. Ang, James S & Chua, Jess H & McConnell, John J, 1982. " The Administrative Costs of Corporate Bankruptcy: A Note," Journal of Finance, American Finance Association, vol. 37(1), pages 219-26, March.
  7. Eberhart, Allan C & Sweeney, Richard J, 1992. " Does the Bond Market Predict Bankruptcy Settlements?," Journal of Finance, American Finance Association, vol. 47(3), pages 943-80, July.
  8. Wruck, Karen Hopper, 1990. "Financial distress, reorganization, and organizational efficiency," Journal of Financial Economics, Elsevier, vol. 27(2), pages 419-444, October.
  9. White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
  10. Weiss, Lawrence A., 1990. "Bankruptcy resolution: Direct costs and violation of priority of claims," Journal of Financial Economics, Elsevier, vol. 27(2), pages 285-314, October.
  11. Morse, Dale & Shaw, Wayne, 1988. " Investing in Bankrupt Firms," Journal of Finance, American Finance Association, vol. 43(5), pages 1193-1206, December.
  12. Abel, István & Gatsios, Konstantine, 1993. "The Economics of Bankruptcy and the Transition to a Market Economy," CEPR Discussion Papers 878, C.E.P.R. Discussion Papers.
  13. James, Christopher, 1991. " The Losses Realized in Bank Failures," Journal of Finance, American Finance Association, vol. 46(4), pages 1223-42, September.
  14. Gilson, Stuart C., 1990. "Bankruptcy, boards, banks, and blockholders : Evidence on changes in corporate ownership and control when firms default," Journal of Financial Economics, Elsevier, vol. 27(2), pages 355-387, October.
  15. George A. Akerlof & Paul M. Romer, 1993. "Looting: The Economic Underworld of Bankruptcy for Profit," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(2), pages 1-74.
  16. Begg, David & Portes, Richard, 1993. "Enterprise debt and financial restructuring in Central and Eastern Europe," European Economic Review, Elsevier, vol. 37(2-3), pages 396-407, April.
  17. Eberhart, Allan C & Moore, William T & Roenfeldt, Rodney L, 1990. " Security Pricing and Deviations from the Absolute Priority Rule in Bankruptcy Proceedings," Journal of Finance, American Finance Association, vol. 45(5), pages 1457-69, December.
  18. Baird, Douglas G., 1991. "The initiation problem in bankruptcy," International Review of Law and Economics, Elsevier, vol. 11(2), pages 223-232, September.
  19. Gilson, Stuart C., 1989. "Management turnover and financial distress," Journal of Financial Economics, Elsevier, vol. 25(2), pages 241-262, December.
  20. Scott, Jonathan A. & Smith, Terence C., 1986. "The effect of the Bankruptcy Reform Act of 1978 on small business loan pricing," Journal of Financial Economics, Elsevier, vol. 16(1), pages 119-140, May.
  21. Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-89, September.
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