Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System

University of Groningen Faculty of Law, Working Paper Series in Law and Economics

27 Pages Posted: 11 Oct 2007

See all articles by Abe de Jong

Abe de Jong

Monash University; University of Groningen; European Corporate Governance Institute (ECGI)

Oscar Couwenberg

NHL Stenden University of Applied Sciences; University of Groningen - Campus Fryslan

Multiple version iconThere are 2 versions of this paper

Date Written: October 2007

Abstract

We present evidence on the efficiency of the resolution of financial distress in bankruptcy in The Netherlands. We employ a unique data set based on the files of the trustees and court offices, which includes the characteristics of the firms before and in the bankruptcy procedures, the details of the bankruptcy process and the outcomes. This data allows us to measure the costs and recovery rates in the Dutch liquidation-based bankruptcy system, and to investigate the determinants of these costs and recoveries. We find that direct costs are on average 16%. The costs are lower in larger firms and firms with more bank debt. Costs increase with the time it takes to sell assets and the number of disputes the trustee has to deal with. The firm recovery rate is on average 37%, while the bank recovers on average 80%. The firm recovery rate is influenced by the asset structure and the capital structure. Moreover, an 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, K22

Suggested Citation

de Jong, Abe and Couwenberg, Oscar, Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System (October 2007). University of Groningen Faculty of Law, Working Paper Series in Law and Economics, Available at SSRN: https://ssrn.com/abstract=1020888 or http://dx.doi.org/10.2139/ssrn.1020888

Abe De Jong

Monash University ( email )

900 Dandenong Rd
Room H3-56
Caulfield East, Victoria 3145
Australia

HOME PAGE: http://https://research.monash.edu/en/persons/abe-de-jong

University of Groningen ( email )

Postbus 72
9700 AB Groningen
Netherlands

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Oscar Couwenberg (Contact Author)

NHL Stenden University of Applied Sciences ( email )

Rengerslaan 8-10
Leeuwarden, Friesland 8917 DD
Netherlands
31 582441479 (Phone)

University of Groningen - Campus Fryslan ( email )

Wirdumerdijk 34
Leeuwarden, 8911 CE
Netherlands
31 582055000 (Phone)

HOME PAGE: http://www.rug.nl/staff/o.couwenberg/?lang=en

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