IDEAS home Printed from https://ideas.repec.org/a/eur/ejisjr/185.html
   My bibliography  Save this article

A Survey of Corporate Bankruptcy Reforms: Lessons to Be Learnt for Worldwide Good Practices

Author

Listed:
  • Afef Boughanmi

    (University of Lorraine (IUP Finance), BETA-CNRS, 13 place Carnot - C0 n° 26 - 54 035 NANCY CEDEX)

  • Nirjhar NIGAM

Abstract

Recent years have witnessed a phenomenal upsurge in the number of corporate bankruptcies. The vulnerabilities which were lying dormant within contemporary bankruptcy regimes suddenly became apparent, causing concerns within the international corporate community. Consequently, researchers, practitioners and policy makers from all over the world got actively engaged in emphasizing the importance of efficient bankruptcy reforms for promoting rescue culture. The primary objective of an insolvency framework should be to provide quick, transparent and cost effective solutions for the resolution of financial distress and promotion of a synergetic environment conducive for the proliferation of healthy debt repayment practices, increased trust factors between creditors and debtors and a better survival rate for viable businesses. In this paper we present a qualitative review of various insolvency reforms introduced in nearly 189 economies over a decade (2005 to 2015), for the efficient resolution of financial distress. For data collection purpose, we use World Bank Database from Doing Business Reports (2005-2015). We provide latest data on the recovery rates, costs, time for resolution based on recent statistics (until June 2015). Finally, we present a list of most popular reforms in bankruptcy and also when possible the effect of their application. This is one of the comprehensive surveys on worldwide corporate bankruptcy reforms. *

Suggested Citation

  • Afef Boughanmi & Nirjhar NIGAM, 2017. "A Survey of Corporate Bankruptcy Reforms: Lessons to Be Learnt for Worldwide Good Practices," European Journal of Interdisciplinary Studies Articles, European Center for Science Education and Research, vol. 8, EJIS May .
  • Handle: RePEc:eur:ejisjr:185
    as

    Download full text from publisher

    File URL: http://journals.euser.org/index.php/ejis/article/view/2024
    Download Restriction: no

    File URL: http://journals.euser.org/files/articles/ejis_may_aug_17/Afef.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. David M. Cutler & Lawrence H. Summers, 1988. "The Costs of Conflict Resolution and Financial Distress: Evidence from the Texaco-Pennzoil Litigation," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 157-172, Summer.
    2. Philippe Aghion & Oliver D. Hart & John Moore, 1994. "The Economics of Bankruptcy Reform," NBER Chapters,in: The Transition in Eastern Europe, Volume 2, Restructuring, pages 215-244 National Bureau of Economic Research, Inc.
    3. Aloisio Araujo & Bruno Funchal & Rafael Ferreira, 2010. "The Brazilian Bankruptcy Law Experiment," Fucape Working Papers 23, Fucape Business School.
    4. Gilson, Stuart C, 1997. " Transactions Costs and Capital Structure Choice: Evidence from Financially Distressed Firms," Journal of Finance, American Finance Association, vol. 52(1), pages 161-196, March.
    5. Michael C. Jensen, 2010. "Active Investors, LBOs, and the Privatization of Bankruptcy," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 77-85, January.
    6. Maria Brouwer, 2006. "Reorganization in US and European Bankruptcy law," European Journal of Law and Economics, Springer, vol. 22(1), pages 5-20, July.
    7. Baird, Douglas G & Morrison, Edward R, 2001. "Bankruptcy Decision Making," Journal of Law, Economics, and Organization, Oxford University Press, vol. 17(2), pages 356-372, October.
    8. Fisher, Timothy C G & Martel, Jocelyn, 1995. "The Creditors' Financial Reorganization Decision: New Evidence from Canadian Data," Journal of Law, Economics, and Organization, Oxford University Press, vol. 11(1), pages 112-126, April.
    9. Stijn Claessens & Leora F. Klapper, 2005. "Bankruptcy around the World: Explanations of Its Relative Use," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 253-283.
    10. Hege, Ulrich, 2003. "Workouts, court-supervised reorganization and the choice between private and public debt," Journal of Corporate Finance, Elsevier, vol. 9(2), pages 233-269, March.
    11. Couwenberg, Oscar, 2001. "Survival rates in bankruptcy systems : overlooking the evidence," Research Report 01E15, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    12. Bebchuk, Lucian Arye, 2000. "Using options to divide value in corporate bankruptcy," European Economic Review, Elsevier, vol. 44(4-6), pages 829-843, May.
    13. 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.
    14. Carapeto, Maria, 2005. "Bankruptcy bargaining with outside options and strategic delay," Journal of Corporate Finance, Elsevier, vol. 11(4), pages 736-746, September.
    15. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817.
    16. Amin, Mohammad & Djankov, Simeon, 2009. "Democracy and reforms," Policy Research Working Paper Series 4835, The World Bank.
    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, pages 381-419.
    18. Chatterjee, Sris & Dhillon, Upinder S. & Ramirez, Gabriel G., 1995. "Coercive tender and exchange offers in distressed high-yield debt restructurings An empirical analysis," Journal of Financial Economics, Elsevier, vol. 38(3), pages 333-360, July.
    19. T.C.G. Fisher & J. Martel, 2000. "Empirical Estimates of Filtering Failure in Court-Supervised reorganization," THEMA Working Papers 2000-45, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    20. repec:dgr:rugsom:01e15 is not listed on IDEAS
    21. Altman, Edward I, 1984. " A Further Empirical Investigation of the Bankruptcy Cost Question," Journal of Finance, American Finance Association, vol. 39(4), pages 1067-1089, September.
    22. Easterbrook, Frank H., 1990. "Is corporate bankruptcy efficient?," Journal of Financial Economics, Elsevier, vol. 27(2), pages 411-417, October.
    23. Oscar Couwenberg, 2001. "Survival Rates in Bankruptcy Systems: Overlooking the Evidence," European Journal of Law and Economics, Springer, vol. 12(3), pages 253-273, November.
    24. Araujo, Aloisio P. & Ferreira, Rafael V.X. & Funchal, Bruno, 2012. "The Brazilian bankruptcy law experience," Journal of Corporate Finance, Elsevier, vol. 18(4), pages 994-1004.
    25. Michael C. Jensen, 1991. "Corporate Control And The Politics Of Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 4(2), pages 13-34, June.
    26. Webb, David C, 1987. "The Importance of Incomplete Information in Explaining the Existence of Costly Bankruptcy," Economica, London School of Economics and Political Science, vol. 54(215), pages 279-288, August.
    27. Gertner, Robert & Scharfstein, David, 1991. " A Theory of Workouts and the Effects of Reorganization Law," Journal of Finance, American Finance Association, vol. 46(4), pages 1189-1222, September.
    28. Thorburn, Karin S., 2000. "Bankruptcy auctions: costs, debt recovery, and firm survival," Journal of Financial Economics, Elsevier, vol. 58(3), pages 337-368, December.
    29. 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.
    30. Baird, Douglas G., 1991. "The initiation problem in bankruptcy," International Review of Law and Economics, Elsevier, vol. 11(2), pages 223-232, September.
    31. Brown, David T, 1989. "Claimholder Incentive Conflicts in Reorganization: The Role of Bankruptcy Law," Review of Financial Studies, Society for Financial Studies, vol. 2(1), pages 109-123.
    32. Mooradian, Robert M, 1994. " The Effect of Bankruptcy Protection on Investment: Chapter 11 as a Screening Device," Journal of Finance, American Finance Association, vol. 49(4), pages 1403-1430, September.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Insolvency Law; Corporate Bankruptcy Law; Liquidation; Reorganization; Bankruptcy cost; recovery rates. JEL classification: G33; K22;

    JEL classification:

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

    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:eur:ejisjr:185. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (European Center for Science Education and Research). General contact details of provider: http://journals.euser.org/index.php/ejis .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.