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

31 Pages Posted: 27 Aug 2007

See all articles by Abe de Jong

Abe de Jong

Rotterdam School of Management, Erasmus University; Monash University

Oscar Couwenberg

University of Groningen - Faculty of Spatial Sciences

Date Written: July 2, 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, Direct costs, Liquidation, Recovery rates

Suggested Citation

de Jong, Abe and Couwenberg, Oscar, Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System (July 2, 2007). ERIM Report Series Reference No. ERS-2007-041-F&A. Available at SSRN: https://ssrn.com/abstract=1008667

Abe De Jong (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

P.O. Box 1738
Room T08-25
Rotterdam, 3000 DR
Netherlands
+31 10 408 1022 (Phone)

HOME PAGE: http://https://www.rsm.nl/people/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

Oscar Couwenberg

University of Groningen - Faculty of Spatial Sciences ( email )

P.O. Box 800
9700 AV Groningen
Netherlands
31 50 363 3907 (Phone)

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

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