Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System
University of Groningen - Faculty of Law - Department of Law and Economics
Abe De Jong
Erasmus University - Rotterdam School of Management
July 10, 2008
European Journal of Law and Economics, Vol. 26, pp. 105-127, 2008
We present evidence on the efficiency of the resolution of financial distress in bankruptcy in The Netherlands. Direct costs average 16%, firm recovery 37% and bank debt recovery 80%. The direct costs are lower in larger firms and in firms with more bank debt. Costs increase with the time it takes to sell assets. Firm recovery is influenced by asset structure, capital structure and to a lesser extent Dutch legal variables. However, the opportunity to continue operations in bankruptcy is chosen by about half the firms and this has a positive effect on recoveries.
Keywords: Bankruptcy, Liquidation, Direct costs, Recovery rates
JEL Classification: G33, K22Accepted Paper Series
Date posted: October 2, 2008
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