Corporate insolvency procedures in England: The uneasy case for liquidations

Régis Blazy and Nirjhar Nigam ()
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Nirjhar Nigam: CEREFIGE and LARGE Research Centers, ICN Business School

Working Papers of LaRGE Research Center from Laboratoire de Recherche en Gestion et Economie (LaRGE), Université de Strasbourg

Abstract: Our paper investigates a comprehensive sample of 574 English corporate insolvency cases, including direct liquidation cases. In contrast to other insolvency procedures, liquidations perform poorly on average and fail to produce satisfactory repayments to creditors. We run multinomial Logit regressions to explain the choice between liquidation and reorganization. We obtain three main results. First, we confirm that size matters: distressed firms owning low assets have higher chances of being liquidated immediately. Second, the presence of secured creditors decreases the risk of direct liquidation. This provides a clue that in England, the most-informed creditors adapt their strategies and turn away from the less-performing procedures. Third, we find that the likelihood of administration—which appears nowadays as the main alternative to direct liquidation—significantly depends on the proportion of fixed/current assets owned by the firms.

Keywords: liquidation; reorganization; receivership; administration; corporate insolvency; England (search for similar items in EconPapers)
JEL-codes: G33 G38 K20 K22 (search for similar items in EconPapers)
Date: 2018
New Economics Papers: this item is included in nep-dcm, nep-eur and nep-law
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http://ifs.u-strasbg.fr/large/publications/2018/2018-02.pdf (application/pdf)

Related works:
Journal Article: Corporate insolvency procedures in England: the uneasy case for liquidations (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:lar:wpaper:2018-02

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