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

Author

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;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1315
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    References listed on IDEAS

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    Cited by:

    1. repec:eee:labeco:v:48:y:2017:i:c:p:35-53 is not listed on IDEAS
    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. 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.
    4. 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.
    5. Fejér-Király Gergely, 2015. "Bankruptcy Prediction: A Survey on Evolution, Critiques, and Solutions," Acta Universitatis Sapientiae, Economics and Business, De Gruyter Open, vol. 3(1), pages 93-108, December.
    6. 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.

    More about this item

    Keywords

    bankruptcy; mortgage; insolvency;

    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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