IDEAS home Printed from
   My bibliography  Save this paper

Bankruptcy law and credit market: a general-equilibrium approach


  • Aloisio Araujo

    (EPGE/FGV and IMPA)

  • Bruno Funcha

    () (FUCAPE Business School)


This study has as its main objective to analyze the best bankruptcy procedure considering the conflict of interests between managers, secured creditors and trade creditors. Such trade-off is strictly connected with industry and countries characteristics, which is also relevant to the design of the bankruptcy law. Simulating a general-equilibrium model with incomplete marktes and bankruptcy, we show that for liquidation procedure that does not depreciates the failed assets too much, bankruptcy-liquidation produces better economic results for sectors intensive in physical capital. As the depreciation in liquidation increases and/or the industry sectors are less intensive in physical capital, the availability of reorganization produces better economic results. Using data of 44 countries, our results points that approximately 60% of the countries in the sample apply a procedure aligned with our suggestions.

Suggested Citation

  • Aloisio Araujo & Bruno Funcha, 2013. "Bankruptcy law and credit market: a general-equilibrium approach," Fucape Working Papers 39, Fucape Business School.
  • Handle: RePEc:bbz:fcpwps:39

    Download full text from publisher

    File URL:
    File Function: Primeira Versão, 2013
    Download Restriction: no

    References listed on IDEAS

    1. Maria Brouwer, 2006. "Reorganization in US and European Bankruptcy law," European Journal of Law and Economics, Springer, vol. 22(1), pages 5-20, July.
    2. Povel, Paul, 1999. "Optimal "Soft" or "Tough" Bankruptcy Procedures," Journal of Law, Economics, and Organization, Oxford University Press, vol. 15(3), pages 659-684, October.
    3. Aloisio Araujo & Bruno Funchal, 2005. "Bankruptcy Law in Latin America: Past and Future," ECONOMIA JOURNAL, THE LATIN AMERICAN AND CARIBBEAN ECONOMIC ASSOCIATION - LACEA, vol. 0(Fall 2005), pages 149-216, August.
    Full references (including those not matched with items on IDEAS)

    More about this item


    Bankruptcy; Legal System; Credit;

    NEP fields

    This paper has been announced in the following NEP Reports:


    Access and download statistics


    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:bbz:fcpwps:39. 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: (Adriana Gasparino). General contact details of provider: .

    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.