Corporate Bankruptcy and the (In-)Efficiency of Small Commercial Courts

Anne Epaulard and Chloé Zapha ()
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Chloé Zapha: LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, Banque de France - Banque de France

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Abstract: This paper assesses the efficiency of small commercial courts. We take advantage of a reform that regroups small commercial courts and estimate its impact on firms' bankruptcy outcomes on the quality of rulings in bankruptcy cases. A conceptual framework allows us to derive the impact of the reform on Type 1 error (restructuring a non-viable firm) and Type 2 error (liquidating a viable firm) from estimated coefficients of a set of difference-in-difference equations. We apply this strategy to an (almost) exhaustive sample of 600~000 bankruptcy cases in France that started between 2000 and 2019. We show that the reform unambiguously reduced Type 1 errors for small firms in absorbed court and left unchanged Type 2 errors. We show that the behavior of the absorbing commercial court now applies to firms that belong to the catching areas of absorbed commercial courts.

Keywords: Corporate Bankruptcy; Commercial Courts (search for similar items in EconPapers)
Date: 2023-09-22
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