Resolution of corporate distress - evidence from East Asia's financial crisis
The widespread financial crisis in East Asia caused large economic shocks, which varied by degree across the region. That crisis provides a unique opportunity for investigating the factors that determine the use of bankruptcy processes in a number of economies. The authors study the use of bankruptcy in Hong Kong, Indonesia, Japan, the Republic of Korea, Malaysia, the Philippines, Singapore, Taiwan (China), and Thailand. These economies differ in their institutional frameworks for resolving financial distress, partly because of the different origins of their judicial systems. One difference is the strength of creditor rights, which the authors document. They expect that differences in legal enforcement and judicial efficiency should affect the resolution of financial distress. Using a sample of 4,569 publicly traded East Asian firms, they observe a total of 106 bankruptcies in 1997 and 1998. They find that: 1) The likelihood of filing for bankruptcy is lower for firms with ownership links to banks and families, controlling for firm and country characteristics. 2) Filings are more likely in countries with better judicial systems. 3) Filings are more likely where there are both strong creditor rights and a good judicial system. These results alone do not allow the authors to address whether increased use of bankruptcy is an efficient resolution mechanism.
|Date of creation:||30 Jun 1999|
|Date of revision:|
|Contact details of provider:|| Postal: 1818 H Street, N.W., Washington, DC 20433|
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Gilson, Stuart C., 1989. "Management turnover and financial distress," Journal of Financial Economics, Elsevier, vol. 25(2), pages 241-262, December.
- Rajan, Raghuram G & Zingales, Luigi, 1995.
" What Do We Know about Capital Structure? Some Evidence from International Data,"
Journal of Finance,
American Finance Association, vol. 50(5), pages 1421-60, December.
- Raghuram G. Rajan & Luigi Zingales, 1994. "What Do We Know About Capital Structure? Some Evidence from International Data," NBER Working Papers 4875, National Bureau of Economic Research, Inc.
- Claessens, Stijn & Klapper, Leora F., 2002.
"Bankruptcy around the World: Explanations of its Relative Use,"
CEI Working Paper Series
2002-17, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
- Stijn Claessens & Leora F. Klapper, 2005. "Bankruptcy around the World: Explanations of Its Relative Use," American Law and Economics Review, Oxford University Press, vol. 7(1), pages 253-283.
- Claessens, Stijn & Klapper, Leora F., 2002. "Bankruptcy around the world - explanations of its relative use," Policy Research Working Paper Series 2865, The World Bank.
- La Porta, Rafael & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997.
" Legal Determinants of External Finance,"
Journal of Finance,
American Finance Association, vol. 52(3), pages 1131-50, July.
- Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
- Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," Harvard Institute of Economic Research Working Papers 1788, Harvard - Institute of Economic Research.
- RAFAEL LaPORTA & FLORENCIO LOPEZ-de-SILANES & ANDREI SHLEIFER & ROBERT W. VISHNY, . "Legal Determinants of External Finance,"," CRSP working papers 324, Center for Research in Security Prices, Graduate School of Business, University of Chicago.
- Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1997. "Legal Determinants of External Finance," NBER Working Papers 5879, National Bureau of Economic Research, Inc.
- Claessens, Stijn & Djankov, Simeon & Lang, Larry H. P., 2000. "The separation of ownership and control in East Asian Corporations," Journal of Financial Economics, Elsevier, vol. 58(1-2), pages 81-112.
- White, Michelle J, 1994. "Corporate Bankruptcy as a Filtering Device: Chapter 11 Reorganizations and Out-of-Court Debt Restructurings," Journal of Law, Economics and Organization, Oxford University Press, vol. 10(2), pages 268-95, October.
- White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
- Prowse, Stephen D, 1992. " The Structure of Corporate Ownership in Japan," Journal of Finance, American Finance Association, vol. 47(3), pages 1121-40, July.
- Stijn Claessens & Simeon Djankov & Joseph P. H. Fan & Larry H. P. Lang, 2002. "Disentangling the Incentive and Entrenchment Effects of Large Shareholdings," Journal of Finance, American Finance Association, vol. 57(6), pages 2741-2771, December.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2133. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.