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

Listed author(s):
  • Blazy, Régis
  • Letaief, Aziza

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.

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File URL: http://www.sciencedirect.com/science/article/pii/S1566014116300693
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Article provided by Elsevier in its journal Emerging Markets Review.

Volume (Year): 30 (2017)
Issue (Month): C ()
Pages: 19-41

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Handle: RePEc:eee:ememar:v:30:y:2017:i:c:p:19-41
DOI: 10.1016/j.ememar.2016.08.021
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620356

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