Abstract
A debt does not function as a liquid asset in an ineffective enforcement environment. In this study, we investigated the efficiency of creditor protection in insolvency. We approached efficiency in three dimensions: ex ante, ex post, and interim. This paper presents the differences between Polish and Spanish ex ante efficiency, the factors influencing the interim recovery rate and efficiency, and the differences between ex ante and ex post efficiency in Polish proceedings. We studied 17,494 financial statements of Polish companies and the finalized proceedings of 784 court cases from the period 2004–2012. We applied regression analysis, combined with classification and robustness tests. Our evidence supports the conclusion that Polish insolvency proceedings are inefficient. The interim efficiency oscillates at 12% per annum. The duration of the proceeding from filing until resolution takes an average of 853 days. These results have policy implications, as creditor protection is a major aspect in attracting investment for net foreign debtors.
Highlights
This study asks how insolvency1 procedures are efficient from the perspective of the creditor.On 13 November, 2013, Spain’s Fagor filed for insolvency
We address with this paper the following issue raised by Shleifer and Vishny (1997): “How do corporate laws differ, and how does enforcement of these laws vary across countries?”, and answer the concerns of Camacho-Miñano et al (2013, p. 187) that on research data: “[...]it is not possible in Spain to have access to some important aspects such as real costs of the bankruptcy process or recovery rate data.”
In terms of fit recovery models outperform efficiency models this suggests differences in perception in the proceedings namely, courts tend to focus on the amounts collected rather than the timing of the proceedings
Summary
This study asks how insolvency procedures are efficient from the perspective of the creditor.On 13 November, 2013, Spain’s Fagor filed for insolvency. On Friday 17 April, 2015, after the official receiver in bankruptcy was dismissed from the post, the new one entered into a contract to sell the bankrupt Fagor Mastercook plant to the Bosch und Siemens Hausgeräte GmbH. It encouraged a debate both at professional and academic forums on the insolvency proceedings efficiency. This case represents one of the first cross-border insolvency proceedings between Poland and Spain, two European Union’s economies with comparable population size, surface area and international credit ratings.. This case represents one of the first cross-border insolvency proceedings between Poland and Spain, two European Union’s economies with comparable population size, surface area and international credit ratings. we use Spain as a benchmark for an ex ante efficiency assessment for Poland
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