Insolvency Regimes and Economic Outcomes

Tatsiana Kliatskova and Loïc Baptiste Savatier

No 133, DIW Roundup: Politik im Fokus from DIW Berlin, German Institute for Economic Research

Abstract: When in distress, a firm may need restructuring or liquidation; in either case, legal uncertainty compounds the difficulty. Sound and efficient insolvency regimes are important as these not just positively affect investment, innovation, and economic growth, but also the supply and cost of credit. The design of appropriate insolvency frameworks in Europe is, however, still controversial. The debate is especially relevant as the European Commission just set a new legal framework for insolvency proceedings. This article both summarizes the recent Directive of the European Commission on minimum standards for national insolvency regimes and provides a review of the literature on how insolvency regimes affect real and financial sectors.

Pages: 6 p.
Date: 2019
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