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Bankruptcy and Firm Dynamics; The Case of the Missing Firms


  • Jose Daniel Rodríguez-Delgado


Financial frictions have been documented as an important determinant of firm dynamics. In this paper I model bankruptcy procedures, liquidation in particular, as an institutional feature that affects both sides of financial transactions. I construct a model of firm dynamics that generate endogenous borrowing limits and I find that a) inefficient bankruptcy procedures can have quantitatively important aggregate effects, but more importantly; b) that such effects would not be directly visible in the firms that industrial censuses and surveys focus on. I conclude that to capture the effects of the legal framework we need to look beyond the existing firms.

Suggested Citation

  • Jose Daniel Rodríguez-Delgado, 2010. "Bankruptcy and Firm Dynamics; The Case of the Missing Firms," IMF Working Papers 10/41, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:10/41

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    References listed on IDEAS

    1. Beck, Thorsten & Demirguc-Kunt, Asli & Levine, Ross, 2003. "Bank supervision and corporate finance," Policy Research Working Paper Series 3042, The World Bank.
    2. Eijffinger, S.C.W. & Hoeberichts, M.M. & Schaling, E., 1998. "A Theory of Central Bank Accountability," Discussion Paper 1998-103, Tilburg University, Center for Economic Research.
    3. Udaibir S Das & Marc G Quintyn, 2002. "Crisis Prevention and Crisis Management; The Role of Regulatory Governance," IMF Working Papers 02/163, International Monetary Fund.
    4. J. De Haan & F. Amtenbrink & S.C.W. Eijffinger, 1999. "Accountability of central banks: aspects and quantification," BNL Quarterly Review, Banca Nazionale del Lavoro, vol. 52(209), pages 169-193.
    5. Udaibir S Das & Marc G Quintyn & Kina Chenard, 2004. "Does Regulatory Governance Matter for Financial System Stability? An Empirical Analysis," IMF Working Papers 04/89, International Monetary Fund.
    6. Marc Quintyn & Michael W. Taylor, 2003. "Regulatory and Supervisory Independence and Financial Stability," CESifo Economic Studies, CESifo, vol. 49(2), pages 259-294.
    7. Michael W Taylor & Marc G Quintyn & Eva H. G. Hüpkes, 2005. "The Accountability of Financial Sector Supervisors; Principles and Practice," IMF Working Papers 05/51, International Monetary Fund.
    8. Barth, James R.*Caprio,Gerard*Levine, Ross, 2001. "The regulation and supervision of banks around the world - a new database," Policy Research Working Paper Series 2588, The World Bank.
    9. International Monetary Fund, 2006. "Regulatory Capture in Banking," IMF Working Papers 06/34, International Monetary Fund.
    10. Eijffinger, S. & De Hann, J., 1995. "The Political Economy of Central Bank Independence," Papers 9587, Tilburg - Center for Economic Research.
    11. Barth, James R. & Caprio, Gerard Jr. & Levine, Ross, 2004. "Bank regulation and supervision: what works best?," Journal of Financial Intermediation, Elsevier, vol. 13(2), pages 205-248, April.
    12. Jean-François Segalotto & Marco Arnone & Bernard J Laurens, 2006. "Measures of Central Bank Autonomy; Empirical Evidence for OECD, Developing, and Emerging Market Economies," IMF Working Papers 06/228, International Monetary Fund.
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    Cited by:

    1. Cesar Tamayo, . "Bankruptcy Choice with Endogenous Financial Constraints," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics.
    2. Julian Neira, 2015. "Bankruptcy and Cross-Country Differences in Productivity," Discussion Papers 1511, Exeter University, Department of Economics.

    More about this item


    Economic models; External debt; Bankruptcy; Borrowing; Private sector; Private investment; firm dynamics; financial constraints; bond; probability; equation; bond price; statistics;

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