Court-supervised Restructuring: Pre-bankruptcy Dynamics, Debt Structure and Debt Rescheduling

B. Leyman (), Koen Schoors and P. Coussement ()
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P. Coussement: -

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We analyze the debt dynamics of corporations that reorganize under Belgian court-supervised restructuring, using a unique sample of small corporations. Small firms systematically accumulate unsecured trade credit and unpaid taxes and social contributions in the running up to bankruptcy-reorganization. First, small firms accumulate overdue taxes and social contributions, pushing the government administration in the unintended role of lender of last resort during the pre-bankruptcy period. Second, we find that the pecking order theory and specific trade credit theories predict the levels of trade credit accumulated during the pre-bankruptcy period very well. Our findings suggest that pre-bankruptcy dynamics strongly affect the debt structure at the moment of initiation of the procedure and in this way the ultimate outcome of the restructuring process.

Keywords: court-supervised reorganization; bankruptcy; pecking order theory (search for similar items in EconPapers)
JEL-codes: G33 G38 K20 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2008-04
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-law
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:08/507

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