Court-Supervised Restructuring: Pre-Bankruptcy Dynamics, Debt Structure and Debt Rescheduling

44 Pages Posted: 5 Jul 2007 Last revised: 22 Apr 2008

Bart Leyman

Ghent University-Universiteit Gent - Faculty of Economics and Business Administration

Koen J. L. Schoors

Ghent University-Universiteit Gent - Centre for Russian International Socio-Political and Economic Studies (CERISE); Ghent University-Universiteit Gent - Department of General Economics

Peter Coussement

Ghent University - Financial Law Institute

Multiple version iconThere are 2 versions of this paper

Date Written: April 2008

Abstract

We analyze the debt dynamics of corporations that reorganize under Belgian court-supervised restructuring, using a unique sample of small corporations. Small firms systematically accumulate unsecured trade credit and unpaid taxes and social contributions in the running up to bankruptcy-reorganization. First, small firms accumulate overdue taxes and social contributions, pushing the government administration in the unintended role of lender of last resort during the pre-bankruptcy period. Second, we find that the pecking order theory and specific trade credit theories predict the levels of trade credit accumulated during the pre-bankruptcy period very well. Our findings suggest that pre-bankruptcy dynamics strongly affect the debt structure at the moment of initiation of the procedure and in this way the ultimate outcome of the restructuring process.

Keywords: court-supervised reorganization, bankruptcy, insolvency regulation

JEL Classification: G33, G38, K20

Suggested Citation

Leyman, Bart and Schoors, Koen J. L. and Coussement, Peter, Court-Supervised Restructuring: Pre-Bankruptcy Dynamics, Debt Structure and Debt Rescheduling (April 2008). Available at SSRN: https://ssrn.com/abstract=998531 or http://dx.doi.org/10.2139/ssrn.998531

Bart Leyman (Contact Author)

Ghent University-Universiteit Gent - Faculty of Economics and Business Administration ( email )

Ghent, B-9000
Belgium

Koen J. L. Schoors

Ghent University-Universiteit Gent - Department of General Economics ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 264 35 99 (Fax)

Ghent University-Universiteit Gent - Centre for Russian International Socio-Political and Economic Studies (CERISE) ( email )

Tweekerkenstraat 2
Ghent, 9000
Belgium
+32 9 264 34 78 (Phone)
+32 9 265 35 99 (Fax)

Peter Coussement

Ghent University - Financial Law Institute ( email )

Universiteitstraat 4
Ghent, B-9000
Belgium
+322686856 (Phone)
+3292686855 (Fax)

HOME PAGE: http://www.law.ugent.be/fli

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