Debt Enforcement Around the World

69 Pages Posted: 21 Dec 2006  

Simeon Djankov

London School of Economics & Political Science (LSE); Peter G. Peterson Institute for International Economics

Oliver Hart

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

Caralee McLiesh

World Bank - International Finance Corporation (IFC)

Andrei Shleifer

Harvard University - Department of Economics; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)

Multiple version iconThere are 2 versions of this paper

Date Written: December 20, 2006

Abstract

We present insolvency practitioners from 88 countries with an identical case of a hotel about to default on its debt, and ask them to describe in detail how debt enforcement against this hotel will proceed in their countries. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern versus piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. We identify several characteristics of debt enforcement procedures, such as the structure of appeals and availability of floating charge finance, that influence efficiency. Our measure of efficiency of debt enforcement is strongly correlated with per capita income and legal origin and predicts debt market development across countries. Interestingly, it is also highly correlated with measures of the quality of contract enforcement and public regulation obtained in other studies.

Keywords: bankruptcy, legal origins

JEL Classification: G33, K2

Suggested Citation

Djankov, Simeon and Hart , Oliver and McLiesh, Caralee and Shleifer, Andrei, Debt Enforcement Around the World (December 20, 2006). ECGI - Finance Working Paper No. 147/2007. Available at SSRN: https://ssrn.com/abstract=953000 or http://dx.doi.org/10.2139/ssrn.953000

Simeon Djankov

London School of Economics & Political Science (LSE) ( email )

Houghton Street
London, WC2A 2AE
United Kingdom

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

Oliver D. Hart

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-496-3461 (Phone)
617-495-7730 (Fax)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Caralee McLiesh

World Bank - International Finance Corporation (IFC) ( email )

2121 Pennsylvania Avenue, NW
Washington, DC 20433
United States

Andrei Shleifer (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-495-5046 (Phone)
617-496-1708 (Fax)

HOME PAGE: http://www.economics.harvard.edu/~ashleife/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

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