The Role of Firm Viability, Creditor Behavior and Judicial Discretion in the Failure of Distressed Firms under Courtsupervised Restructuring: Evidence from Belgium

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: Unlike Chapter 11 in the U.S., the Belgian reorganization legislation requires that distressed firms remain under court-supervision during plan execution. In principle, the court-supervised post confirmation stage takes a fixed period of 24 months. Using a unique sample of small Belgian firms, we analyze both the likelihood of failure and the time spent before transfer to bankruptcy-liquidation during this post-confirmation stage. More profitable debtors are less likely to fail. If banks are secured by collateral with high liquidation value, debtors are more likely to fail. The mandatory repayment of government debt, like unpaid taxes and social contributions, also renders the distressed firm more likely to fail. Judicial discretion sharply affects the likelihood of failure in a sub sample of individual debtors seeking to preserve a sole proprietorship.

Keywords: court-supervised reorganization; bankruptcy; insolvency legislation (search for similar items in EconPapers)
JEL-codes: G33 G38 K20 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2008-04
New Economics Papers: this item is included in nep-cfn and nep-law
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:08/509

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