Buiding legal indexes to explain recovery rates: An analysis of the French and English bankrupcy codes

Régis Blazy, Bertrand Chopard and Nirjhar Nigam ()
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Nirjhar Nigam: ICN Business School, CEREFIGE - Centre Européen de Recherche en Economie Financière et Gestion des Entreprises - UL - Université de Lorraine

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Abstract: The paper analyzes the characteristics of bankruptcy procedures that may impact on creditors' recoveries. We propose 132 legal indexes accounting for the main functions of bankruptcy codes: namely, the accessibility of the procedures, their ability to disclose information, the protection of debtor's assets, the coordination of the claimants and their decision power, and the sanction of management. The French procedures are more protective of the debtor's assets and prioritize the coordination of claims. In England, liquidation procedures protect more secured claims, while unsecured creditors have more decision power under reorganization procedures. Our indexes are then used to explain recovery rates on a set of 833 bankrupt SMEs. Several bankruptcy rules are associated with higher recoveries: namely, accessibility of the procedure, protection of the debtor's assets, protection of claims, and sanction of faulty management. On the contrary, information disclosure has negative impact on recoveries, probably due to the breach in confidentiality.

Keywords: Bankruptcy; Recoveries; Legal indexes (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (19)

Published in Journal of Banking and Finance, 2013, 37 (6), pp.1936-1959. ⟨10.1016/j.jbankfin.2012.10.024⟩

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Journal Article: Building legal indexes to explain recovery rates: An analysis of the French and English bankruptcy codes (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-01514536

DOI: 10.1016/j.jbankfin.2012.10.024

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