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Debt Enforcement Around the World

  • Simeon Djankov
  • Oliver Hart
  • Caralee McLiesh
  • Andrei Shleifer

We present insolvency practitioners from 88 countries with an identical case of a hotel about to default on its debt, and ask them to describe in detail how debt enforcement against this hotel will proceed in their countries. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern versus piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. We identify several characteristics of debt enforcement procedures, such as the structure of appeals and availability of floating charge finance, that influence efficiency. Our measure of efficiency of debt enforcement is strongly correlated with per capita income and legal origin and predicts debt market development across countries. Interestingly, it is also highly correlated with measures of the quality of contract enforcement and public regulation obtained in other studies.

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File URL: http://www.nber.org/papers/w12807.pdf
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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 12807.

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Date of creation: Dec 2006
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Publication status: published as Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December.
Handle: RePEc:nbr:nberwo:12807
Note: CF LE
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