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
There are 2 versions of this paper
Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System
Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System
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: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Debt Enforcement Around the World
By Simeon Djankov, Oliver Hart, ...
-
Debt Enforcement Around the World
By Simeon Djankov, Oliver Hart, ...
-
By Arturo Bris, Ivo Welch, ...
-
By Stuart C. Gilson, Edith S. Hotchkiss, ...
-
By Lawrence A. Weiss and Karen H. Wruck
-
Asset Efficiency and Reallocation Decisions of Bankrupt Firms
-
Bankruptcy Around the World: Explanations of its Relative Use
By Stijn Claessens and Leora F. Klapper
-
Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany and the UK
By Sergei Davydenko and Julian R. Franks
-
Vulture Investors and the Market for Control of Distressed Firms