EconPapers    
Economics at your fingertips  
 

Serving the creditors after insolvency filings: from value creation to value distribution

Régis Blazy, Joël Petey () and Laurent Weill ()

European Journal of Law and Economics, 2018, vol. 45, issue 2, No 6, 375 pages

Abstract: Abstract This paper provides original empirical evidence on the financial outcome of insolvency filings in Europe. We adopt a cross-country analysis of the determinants of recovery rates isolating three types of creditors (junior, senior, and new money claims). We investigate the structure of recoveries on a unique hand-collected sample of bankrupt firms in France, Germany, and the UK. We initially question value maximization, and study to which extent the legal provisions prevailing after insolvency filing can influence creditors’ overall recoveries. Three procedures differ significantly from our benchmark (UK liquidations). French continuation and UK receivership exert a positive influence onto total repayments, while such influence becomes negative under French liquidation. We relate this finding to the ability of the two former procedures to improve coordination among the creditors, monitoring of the debtor, and/or incentives to file early. We then analyze value distribution by examining competition between the categories of creditors. We show that the insolvency systems do not converge. Junior and senior creditors are better served under the German and the French continuation procedures than in any other bankruptcy path. At the opposite, the UK liquidation procedures fail to satisfactorily serve the junior/senior creditors. Still, nearly all the insolvency procedures support fresh financing by protecting quite well new money claims. Overall, we do not confirm any superiority of one family of insolvency system over another, but rather stress the importance of an appropriate design of the procedures, especially regarding the incentives they create before and after insolvency filing.

Keywords: Law and finance; Bankruptcy law; Recovery rates; Creditors (search for similar items in EconPapers)
JEL-codes: G33 K22 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://link.springer.com/10.1007/s10657-017-9560-9 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kap:ejlwec:v:45:y:2018:i:2:d:10.1007_s10657-017-9560-9

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/10657

Access Statistics for this article

European Journal of Law and Economics is currently edited by Jürgen Georg Backhaus, Giovanni B. Ramello and Alain Marciano

More articles in European Journal of Law and Economics from Springer
Bibliographic data for series maintained by Sonal Shukla ().

 
Page updated 2019-04-19
Handle: RePEc:kap:ejlwec:v:45:y:2018:i:2:d:10.1007_s10657-017-9560-9