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

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Listed:
  • Couwenberg, O.
  • de Jong, A.

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.

Suggested Citation

  • Couwenberg, O. & de Jong, A., 2007. "Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System," ERIM Report Series Research in Management ERS-2007-041-F&A, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus University Rotterdam.
    • Handle: RePEc:ems:eureri:10461
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    References listed on IDEAS

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    More about this item

    Keywords

    Bankruptcy; Direct costs; Liquidation; Recovery rates;
    All these keywords.

    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • M - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics

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