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When secured and unsecured creditors recover the same: The emblematic case of the Tunisian corporate bankruptcies

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  • Blazy, Régis
  • Letaief, Aziza

Abstract

Bankruptcy is an essential screening mechanism for developing economies. This paper focuses on the way bankruptcy is managed in Tunisia, a country characterized by the importance of its banking sector. We collected data on a set of bankrupt firms (1995–2009). We address several questions. Do the Tunisian bankruptcy procedures generate substantial overall recoveries? Are the secured creditors (mostly banks) well-enough protected under bankruptcy, and do they influence the courts' decisions? To which extent the creditors compete together? The highest recoveries are found mostly under reorganization procedures. Yet, despite a high level of competition between the classes of claimholders, the secured creditors' recovery rate remains similar to one of the unsecured creditors. Last, the court's decision to liquidate/reorganize the debtor seems not influenced by the structure of claims. The likely consequences on development are twofold: higher risks of capital misallocation/credit rationing, and stronger incentives for the banks to prioritize informal workouts.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:ememar:v:30:y:2017:i:c:p:19-41
    DOI: 10.1016/j.ememar.2016.08.021
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    More about this item

    Keywords

    Bankruptcy; Creditors; Development; Tunisia; Heckman model; Propensity score;

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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