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Are there alternatives to bankruptcy? a study of small business distress in Spain

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Listed:
  • Miguel García-Posada

    (Banco de España-Eurosystem)

  • Juan S. Mora-Sanguinetti

    (Banco de España-Eurosystem)

Abstract

Small businesses, the majority of Spanish fi rms, rarely fi le for formal bankruptcy, and this has been the case even during the current economic crisis. This suggests that bankruptcy law has a limited role to play in the distress of small fi rms. We propose an explanation based on two premises: (i) bankruptcy procedures are more costly and drawn out than the main alternative procedure, the mortgage foreclosure; (ii) personal bankruptcy law is unattractive to the individual debtor. Empirical analyses on a large micro data sample of Spanish, French and UK fi rms corroborate our hypothesis. It is important to note that these results are based on data that do not yet capture the impact of recent reforms of the Spanish insolvency framework.

Suggested Citation

  • Miguel García-Posada & Juan S. Mora-Sanguinetti, 2013. "Are there alternatives to bankruptcy? a study of small business distress in Spain," Working Papers 1315, Banco de España.
    • Handle: RePEc:bde:wpaper:1315
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    Cited by:

    1. de Andrés, Pablo & Gimeno, Ricardo & Mateos de Cabo, Ruth, 2021. "The gender gap in bank credit access," Journal of Corporate Finance, Elsevier, vol. 71(C).
    2. Bottasso, Anna & Conti, Maurizio & Sulis, Giovanni, 2017. "Firm dynamics and employment protection: Evidence from sectoral data," Labour Economics, Elsevier, vol. 48(C), pages 35-53.
    3. Mangena, Musa & Priego, Alba Maria & Manzaneque, Montserrat, 2020. "Bank power, block ownership, boards and financial distress likelihood: An investigation of Spanish listed firms," Journal of Corporate Finance, Elsevier, vol. 64(C).
    4. Stolbov, Mikhail & Shchepeleva, Maria, 2020. "Systemic risk, economic policy uncertainty and firm bankruptcies: Evidence from multivariate causal inference," Research in International Business and Finance, Elsevier, vol. 52(C).
    5. Juan Jimeno & Tano Santos, 2014. "The crisis of the Spanish economy," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 5(2), pages 125-141, August.
    6. Luisa Fuster, 2022. "Macroeconomic and distributive effects of increasing taxes in Spain," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 13(4), pages 613-648, December.
    7. Blanco, Roberto & Fernández-Ortiz, Elena & García-Posada, Miguel & Mayordomo, Sergio, 2024. "A new estimation of default probabilities based on non-performing loans," Finance Research Letters, Elsevier, vol. 62(PB).
    8. Manuel García-Santana & Roberto Ramos, 2015. "Distortions and the size distribution of plants: evidence from cross-country data," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 6(3), pages 279-312, August.
    9. García-Posada Gómez, Miguel & Vegas Sánchez, Raquel, 2018. "Bankruptcy reforms in the midst of the Great Recession: The Spanish experience," International Review of Law and Economics, Elsevier, vol. 55(C), pages 71-95.
    10. Piotr Staszkiewicz & Sylwia Morawska, 2019. "The efficiency of bankruptcy law: evidence of creditor protection in Poland," European Journal of Law and Economics, Springer, vol. 48(3), pages 365-383, December.
    11. Ewelina Mruk & Inmaculada Aguiar-Díaz & Maria Victoria Ruiz-Mallorquí, 2019. "Use of formal insolvency procedure and judicial efficiency in Spain," European Journal of Law and Economics, Springer, vol. 47(3), pages 435-470, June.
    12. Edmundo Escrivão Filho & Alexandre Farias Albuquerque & Marcelo Seido Nagano & Luiz Adalberto Philippsen Junior & Jair de Oliveira, 2017. "Identifying SME mortality factors in the life cycle stages: an empirical approach of relevant factors for small business owner-managers in Brazil," Journal of Global Entrepreneurship Research, Springer;UNESCO Chair in Entrepreneurship, vol. 7(1), pages 1-15, December.
    13. Paramonovs Sergejs & Ijevleva Ksenija, 2015. "The Role of Marketing Tools in the Improvement of Consumers Financial Literacy," Acta Universitatis Sapientiae, Economics and Business, Sciendo, vol. 27(1), pages 40-45, December.
    14. Claudio Detotto & Laura Serra & Marco Vannini, 2019. "Did specialised courts affect the frequency of business bankruptcy petitions in Spain?," European Journal of Law and Economics, Springer, vol. 47(1), pages 125-145, February.
    15. Marco Celentani & Miguel García-Posada & Fernando Gómez Pomar, 2022. "Fresh start policies and small business activity: evidence from a natural experiment," Working Papers 2210, Banco de España.
    16. Miron Vasile Cristian Ioachim & Voiculescu Alina & Popa (Jeler) Ioana, 2015. "Analysis Models Of The Bankruptcy Risk In Romania’S Energy Sector," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 6, pages 249-256, December.
    17. Salvador Ortí-Camallonga, 2018. "Constraints of Spanish Insolvency Law. A predictive bankruptcy model for Spanish industrial SMEs (2007-2015)," Working Papers 2018/01, Economics Department, Universitat Jaume I, Castellón (Spain).

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    More about this item

    Keywords

    bankruptcy; mortgage; insolvency;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • K0 - Law and Economics - - General

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