Bankruptcy Efficiency and Indirect Costs in Italian SMEs: a Temporal Approach

Abstract

The aim of the paper is to analyze the main goals of bankruptcy procedures and the different facets of their efficiency, which can be investigated according to an ex post or ex ante perspective. Unlike previous literature, which has mainly hypothesized a contrast between these two viewpoints, in this paper we assume a strong interdependence among ex ante and ex post perspectives, combining them in a wider and inclusive temporal approach. We investigate this approach by referring to indirect costs of bankruptcy, a variable that affects both perspectives, highlighting the temporal and logical continuity between ex ante and ex post viewpoints. Starting from the empirical results of a recent study on Italian SMEs, we argue that an efficient procedure should be able to find a good balance between two perspectives, on the grounds that the maximization of the outcome available for the creditors ( ex post efficiency) is affected by the willingness and timing of filing for bankruptcy ( ex ante efficiency): delaying this moment would generate the indirect costs analyzed in the paper, leading to a decrease in the overall value of the firm and damaging its stakeholders.