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Building Legal Indexes to Explain Recovery Rates: An Analysis of the French and English Bankruptcy Codes

Listed author(s):
  • Régis Blazy
  • Bertrand Chopard

    ()

    (EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Nirjhar Nigam

    (ICN Business School)

The paper analyzes the characteristics of bankruptcy procedures that may impact on creditors’ recoveries. We propose 132 legal indexes accounting for the main functions of bankruptcy codes: namely, the accessibility of the procedures, their ability to disclose information, the protection of debtor’s assets, the coordination of the claimants and their decision power, and the sanction of management. The French procedures are more protective of the debtor’s assets and prioritize the coordination of claims. In England, liquidation procedures protect more secured claims, while unsecured creditors have more decision power under reorganization procedures. Our indexes are then used to explain recovery rates on a set of 833 bankrupt SMEs. Several bankruptcy rules are associated with higher recoveries: namely, accessibility of the procedure, protection of the debtor’s assets, protection of claims, and sanction of faulty management. On the contrary, information disclosure has negative impact on recoveries, probably due to the breach in confidentiality.

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Paper provided by HAL in its series Post-Print with number hal-01385918.

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Length:
Date of creation: 2013
Publication status: Published in Journal of Banking and Finance, Elsevier, 2013, 37
Handle: RePEc:hal:journl:hal-01385918
Note: View the original document on HAL open archive server: https://hal-univ-paris10.archives-ouvertes.fr/hal-01385918
Contact details of provider: Web page: https://hal.archives-ouvertes.fr/

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  1. 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.
  2. Bergstrom, Clas & Eisenberg, Theodore & Sundgren, Stefan, 2002. "Secured debt and the likelihood of reorganization," International Review of Law and Economics, Elsevier, vol. 21(4), pages 359-372, May.
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