Bankruptcy around the world - explanations of its relative use
Stijn Claessens () and
Leora Klapper ()
No 2865, Policy Research Working Paper Series from The World Bank
The recent literature on law and finance has drawn attention to the importance of creditor rights in influencing the development of financial systems and in affecting firm corporate governance and financing patterns. Recent financial crises have also highlighted the importance of insolvency systems to resolve corporate sector financial distress. The literature and crises have emphasized the complex role of creditor rights, affecting not only the efficiency of ex-post resolution of distressed corporations, but also influencing ex-ante risk-taking incentives and an economy's degree of entrepreneurship more generally. The authors document how often bankruptcy is actually being used for a panel of 35 countries. Next they investigate the effects of specific design features of insolvency regimes in relation to the quality of the countries'overall judicial systems on the use of bankruptcy. The authors find, correcting for overall financial development and macroeconomic shocks, that bankruptcies are higher in Anglo-Saxon countries and in market-oriented financial systems characterized by weaker and multiple banking relationships. They also find that greater judicial efficiency is associated with more use of bankruptcy, but that the combination of stronger creditor rights with greater judicial efficiency leads to less use. The authors find that the presence of a"stay on assets"leads to fewer bankruptcies independent of the efficiency of the judicial system. These findings suggest that there are important incentive effects of insolvency systems encouraging less risky behavior and more out-of-court settlements.
Keywords: Labor Policies; International Terrorism&Counterterrorism; Payment Systems&Infrastructure; Strategic Debt Management; Banks&Banking Reform; Strategic Debt Management; Banks&Banking Reform; Housing Finance; Economic Theory&Research; Legal Products (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18) Track citations by RSS feed
Downloads: (external link)
http://www-wds.worldbank.org/external/default/WDSC ... d/PDF/multi0page.pdf (application/pdf)
Journal Article: Bankruptcy around the World: Explanations of Its Relative Use (2005)
Working Paper: Bankruptcy around the World: Explanations of its Relative Use (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wbk:wbrwps:2865
Access Statistics for this paper
More papers in Policy Research Working Paper Series from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Roula I. Yazigi ().