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Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?

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  • Jaka Cepec
  • Peter Grajzl
  • Katarina Zajc

Abstract

Insolvency systems play a crucial role in protection of creditor rights, yet micro-level empirical evidence on the functioning of insolvency regimes worldwide is sparse. We investigate whether creditors' recovery of outstanding claims, a measure of ex-post efficiency of an insolvency regime, depends on the characteristics of the trustee delegated the administration of the liquidation proceedings. To this end, we draw on a novel dataset of firm liquidations from Slovenia and exploit courts' de facto random assignment of firm liquidation cases to licensed liquidation trustees. Using a wide range of specifications and controls, we find that a subset of trustee characteristics indeed matters for debt recovery. Thus, ex-post efficiency of an insolvency regime depends not only on its formal rules and procedures, but also on who implements them in practice.

Suggested Citation

  • Jaka Cepec & Peter Grajzl & Katarina Zajc, 2016. "Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?," Quaderni del Dipartimento di Economia, Finanza e Statistica 24/2016, Università di Perugia, Dipartimento Economia.
    • Handle: RePEc:pia:wpaper:0024/2016
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    File URL: http://www.econ.unipg.it/files/generale/WP_2016/WP_24_2016_Cepec.pdf
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    More about this item

    Keywords

    insolvency; firm liquidations; debt recovery; liquidation trustees; Slovenia;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • P37 - Political Economy and Comparative Economic Systems - - Socialist Institutions and Their Transitions - - - Legal

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