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Are there alternatives to bankruptcy? a study of small business distress in Spain

Miguel Garcia-Posada and Juan Mora-Sanguinetti

No 1315, Working Papers from Banco de España

Abstract: Small businesses, the majority of Spanish fi rms, rarely fi le for formal bankruptcy, and this has been the case even during the current economic crisis. This suggests that bankruptcy law has a limited role to play in the distress of small fi rms. We propose an explanation based on two premises: (i) bankruptcy procedures are more costly and drawn out than the main alternative procedure, the mortgage foreclosure; (ii) personal bankruptcy law is unattractive to the individual debtor. Empirical analyses on a large micro data sample of Spanish, French and UK fi rms corroborate our hypothesis. It is important to note that these results are based on data that do not yet capture the impact of recent reforms of the Spanish insolvency framework.

Keywords: bankruptcy; mortgage; insolvency (search for similar items in EconPapers)
JEL-codes: G21 G33 K0 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2013-10
New Economics Papers: this item is included in nep-cfn, nep-cse, nep-ent, nep-eur, nep-law and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.bde.es/f/webbde/SES/Secciones/Publicaci ... /13/Fich/dt1315e.pdf First version, October 2013 (application/pdf)

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Journal Article: Are there alternatives to bankruptcy? A study of small business distress in Spain (2014) Downloads
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