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http://ssrn.com/abstract=905196
 
 

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Legal Reform and Aggregate Small and Micro Business Bankruptcy Rates: Evidence from the 1997 Belgian Bankruptcy Code


Nico Dewaelheyns


Lessius University College; KU Leuven - Faculty of Business and Economics (FEB)

Cynthia Van Hulle


KU Leuven - Department of Applied Economics

May 2006

K.U. Leuven AFI Working Paper No. 0607

Abstract:     
Many Continental European countries recently reformed their bankruptcy legislations to stimulate reorganization and firm survival. We show that the Belgian 1997 bankruptcy code reform, which implemented several international best practice recommendations, significantly reduced aggregate small and micro business bankruptcy rates. However, using distributed lag models to control for the relationship between bankruptcy rates and macroeconomic variables such as real GDP growth, consumer confidence, inflation, etc., we find that the new code's impact is not the same for all types of companies. Specifically, while the beneficial effect of the reform is largely similar between small firms (i.e. stock corporations) and micro firms (i.e. partnerships), it is only significant in certain industries (manufacturing and trade). Overall, our results indicate that solely the reforms aimed at limiting domino bankruptcy effects have had a substantial impact. Our findings have several policy implications for the evaluation and modification of the bankruptcy system.

Number of Pages in PDF File: 35

Keywords: Bankruptcy reform, Aggregate bankruptcy rates

JEL Classification: G33, E32, K22

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Date posted: June 1, 2006  

Suggested Citation

Dewaelheyns, Nico and Van Hulle, Cynthia, Legal Reform and Aggregate Small and Micro Business Bankruptcy Rates: Evidence from the 1997 Belgian Bankruptcy Code (May 2006). K.U. Leuven AFI Working Paper No. 0607. Available at SSRN: http://ssrn.com/abstract=905196 or http://dx.doi.org/10.2139/ssrn.905196

Contact Information

Nico Dewaelheyns (Contact Author)
Lessius University College ( email )
Department of Business Studies
Korte Nieuwstraat 33
Antwerp, 2000
Belgium
KU Leuven - Faculty of Business and Economics (FEB) ( email )
Naamsestraat 69
Leuven, B-3000
Belgium
Cynthia Van Hulle
KU Leuven - Department of Applied Economics ( email )
Naamsestraat 69
B-3000 Leuven
BELGIUM
32-16-326734 (Phone)
32-16-326732 (Fax)
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