IDEAS home Printed from https://ideas.repec.org/p/hal/journl/hal-01823515.html
   My bibliography  Save this paper

Bankruptcy Delay and Firms’ dynamics

Author

Listed:
  • Alessandro Melcarne

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Giovanni Battista Ramello

Abstract

The present paper explores the link between bankruptcy law and firms' dynamics, focusing on Italy as a case study. Relying on a previous literature dealing with the concept of entrepreneurship "friendly" bankruptcy law, we stress the idea that bankruptcy institutions, although connected to a painful event for firms, might still yield beneficial consequences on a societal level. In particular, we find evidence that quicker judicial resolutions of liquidation bankruptcies have an impact on firms' entry and exit rates in Italy, by reducing the indirect costs that a bankrupt firm must undergo and allowing a quicker reallocation of assets towards more efficient destinations. Such effect is related with firms' organizational structure and size.

Suggested Citation

  • Alessandro Melcarne & Giovanni Battista Ramello, 2020. "Bankruptcy Delay and Firms’ dynamics," Post-Print hal-01823515, HAL.
    • Handle: RePEc:hal:journl:hal-01823515
    DOI: 10.1007/s11187-018-0041-5
    as

    Download full text from publisher

    To our knowledge, this item is not available for download. To find whether it is available, there are three options:
    1. Check below whether another version of this item is available online.
    2. Check on the provider's web page whether it is in fact available.
    3. Perform a search for a similarly titled item that would be available.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Lee, Seung-Hyun & Yamakawa, Yasuhiro & Peng, Mike W. & Barney, Jay B., 2011. "How do bankruptcy laws affect entrepreneurship development around the world?," Journal of Business Venturing, Elsevier, vol. 26(5), pages 505-520, September.
    2. Melcarne Alessandro & Ramello Giovanni B., 2015. "Judicial Independence, Judges’ Incentives and Efficiency," Review of Law & Economics, De Gruyter, vol. 11(2), pages 149-169, July.
    3. Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2002. "The Regulation of Entry," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(1), pages 1-37.
    4. Kenneth Ayotte, 2007. "Bankruptcy and Entrepreneurship: The Value of a Fresh Start," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 23(1), pages 161-185, April.
    5. Michael C. Jensen, 2010. "The Modern Industrial Revolution, Exit, and the Failure of Internal Control Systems," Journal of Applied Corporate Finance, Morgan Stanley, vol. 22(1), pages 43-58, January.
    6. Arturo Bris & Ivo Welch & Ning Zhu, 2006. "The Costs of Bankruptcy: Chapter 7 Liquidation versus Chapter 11 Reorganization," Journal of Finance, American Finance Association, vol. 61(3), pages 1253-1303, June.
    7. Buonanno Paolo & Galizzi Matteo M., 2014. "Advocatus, et non Latro? Testing the Excess of Litigation in the Italian Courts of Justice," Review of Law & Economics, De Gruyter, vol. 10(3), pages 285-322, November.
    8. Stijn Claessens & Leora F. Klapper, 2005. "Bankruptcy around the World: Explanations of Its Relative Use," American Law and Economics Review, American Law and Economics Association, vol. 7(1), pages 253-283.
    9. Thomas Eger, 2001. "Bankruptcy Regulations and the New German Insolvency Law from an Economic Point of View," European Journal of Law and Economics, Springer, vol. 11(1), pages 29-46, January.
    10. Shawn M. Rohlin & Amanda Ross, 2016. "Does Bankruptcy Law Affect Business Turnover? Evidence From New And Existing Business," Economic Inquiry, Western Economic Association International, vol. 54(1), pages 361-374, January.
    11. Bebchuk, Lucian Arye, 2000. "Using options to divide value in corporate bankruptcy," European Economic Review, Elsevier, vol. 44(4-6), pages 829-843, May.
    12. John Armour & Douglas Cumming, 2008. "Bankruptcy Law and Entrepreneurship," American Law and Economics Review, American Law and Economics Association, vol. 10(2), pages 303-350.
    13. Chemin, Matthieu, 2009. "The impact of the judiciary on entrepreneurship: Evaluation of Pakistan's "Access to Justice Programme"," Journal of Public Economics, Elsevier, vol. 93(1-2), pages 114-125, February.
    14. Saul Estrin & Tomasz Mickiewicz & Anna Rebmann, 2017. "Prospect theory and the effects of bankruptcy laws on entrepreneurial aspirations," Small Business Economics, Springer, vol. 48(4), pages 977-997, April.
    15. Roberto Ippoliti & Alessandro Melcarne & Giovanni Ramello, 2015. "Judicial efficiency and entrepreneurs’ expectations on the reliability of European legal systems," European Journal of Law and Economics, Springer, vol. 40(1), pages 75-94, August.
    16. Frank M. Fossen, 2014. "Personal Bankruptcy Law, Wealth, and Entrepreneurship—Evidence from the Introduction of a "Fresh Start" Policy," American Law and Economics Review, American Law and Economics Association, vol. 16(1), pages 269-312.
    17. Michael Fritsch & Alexandra Schroeter, 2011. "Why does the effect of new business formation differ across regions?," Small Business Economics, Springer, vol. 36(4), pages 383-400, May.
    18. Fan, Wei & White, Michelle J, 2003. "Personal Bankruptcy and the Level of Entrepreneurial Activity," Journal of Law and Economics, University of Chicago Press, vol. 46(2), pages 543-567, October.
    19. Baumol, William J., 1996. "Entrepreneurship: Productive, unproductive, and destructive," Journal of Business Venturing, Elsevier, vol. 11(1), pages 3-22, January.
    20. Farzana Chowdhury & Siri Terjesen & David Audretsch, 2015. "Varieties of entrepreneurship: institutional drivers across entrepreneurial activity and country," European Journal of Law and Economics, Springer, vol. 40(1), pages 121-148, August.
    21. Miguel García-Posada & Juan Mora-Sanguinetti, 2015. "Does (average) size matter? Court enforcement, business demography and firm growth," Small Business Economics, Springer, vol. 44(3), pages 639-669, March.
    22. Giuliana Palumbo & Giulia Giupponi & Luca Nunziata & Juan S. Mora Sanguinetti, 2013. "The Economics of Civil Justice: New Cross-country Data and Empirics," OECD Economics Department Working Papers 1060, OECD Publishing.
    23. Ye (George) Jia, 2015. "The impact of personal bankruptcy law on entrepreneurship," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 48(2), pages 464-493, May.
    24. Sharon Simmons & Johan Wiklund & Jonathan Levie, 2014. "Stigma and business failure: implications for entrepreneurs’ career choices," Small Business Economics, Springer, vol. 42(3), pages 485-505, March.
    25. Audretsch, David B, 1991. "New-Firm Survival and the Technological Regime," The Review of Economics and Statistics, MIT Press, vol. 73(3), pages 441-450, August.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Stef, Nicolae, 2022. "How does legal design affect the initiation of a firm's bankruptcy?," Economic Modelling, Elsevier, vol. 114(C).
    2. Miguel García-Posada & Raquel Vegas, 2016. "Las reformas de la Ley Concursal durante la Gran Recesión," Working Papers 1610, Banco de España.
    3. Marciano, Alain & Ramello, Giovanni B., 2019. "Introduction to the symposium on the empirics of judicial institutions," Journal of Institutional Economics, Cambridge University Press, vol. 15(1), pages 73-80, February.
    4. Miloš Božović, 2021. "Judicial efficiency and loan performance: micro evidence from Serbia," European Journal of Law and Economics, Springer, vol. 52(1), pages 33-56, August.
    5. Julian Oliver Dörr & Georg Licht & Simona Murmann, 2022. "Small firms and the COVID-19 insolvency gap," Small Business Economics, Springer, vol. 58(2), pages 887-917, February.
    6. Juan S. Mora-Sanguinetti & Ricardo Pérez-Valls, 2021. "How does regulatory complexity affect business demography? Evidence from Spain," European Journal of Law and Economics, Springer, vol. 51(2), pages 203-242, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chong Kyoon Lee & Johan Wiklund & Alejandro Amezcua & Tae Jun Bae & Almantas Palubinskas, 2022. "Business failure and institutions in entrepreneurship: a systematic review and research agenda," Small Business Economics, Springer, vol. 58(4), pages 1997-2023, April.
    2. Saul Estrin & Tomasz Mickiewicz & Anna Rebmann, 2017. "Prospect theory and the effects of bankruptcy laws on entrepreneurial aspirations," Small Business Economics, Springer, vol. 48(4), pages 977-997, April.
    3. Lee, Seung-Hyun & Yamakawa, Yasuhiro & Peng, Mike W. & Barney, Jay B., 2011. "How do bankruptcy laws affect entrepreneurship development around the world?," Journal of Business Venturing, Elsevier, vol. 26(5), pages 505-520, September.
    4. Błażej Prusak & Sylwia Morawska & Michał Łukowski & Przemysław Banasik, 2022. "The impact of bankruptcy regimes on entrepreneurship and innovation. Is there any relationship?," International Entrepreneurship and Management Journal, Springer, vol. 18(1), pages 473-498, March.
    5. Seung-Hyun Lee & Yasuhiro Yamakawa, 2012. "Forgiving Features for Failed Entrepreneurs vs. Cost of Financing inBankruptcies," Management International Review, Springer, vol. 52(1), pages 49-79, February.
    6. Miguel García-Posada & Juan Mora-Sanguinetti, 2015. "Entrepreneurship and enforcement institutions: disaggregated evidence for Spain," European Journal of Law and Economics, Springer, vol. 40(1), pages 49-74, August.
    7. Douglas Cumming & Minjie Zhang, 2023. "Bankruptcy law and angel investors around the world," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 54(7), pages 1256-1277, September.
    8. Luca Farè & Marcus Dejardin & Eric Toulemonde, 2024. "Bankruptcy recovery rate and small businesses’ innovation," Applied Economics, Taylor & Francis Journals, vol. 56(32), pages 3870-3903, July.
    9. Johan Eklund & Nadine Levratto & Giovanni B. Ramello, 2020. "Entrepreneurship and failure: two sides of the same coin?," Small Business Economics, Springer, vol. 54(2), pages 373-382, February.
    10. Emanuela Carbonara & Enrico Santarelli & Hien Thu Tran, 2016. "De jure determinants of new firm formation: how the pillars of constitutions influence entrepreneurship," Small Business Economics, Springer, vol. 47(1), pages 139-162, June.
    11. Pankaj C. Patel & Srikant Devaraj, 2021. "The state‐level exemption changes in Chapter 7 protection and entrepreneurial activity in the United States," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(5), pages 1089-1104, July.
    12. Marco Vivarelli, 2013. "Is entrepreneurship necessarily good? Microeconomic evidence from developed and developing countries," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 22(6), pages 1453-1495, December.
    13. Vivarelli, Marco, 2012. "Drivers of entrepreneurship and post-entry performance : microeconomic evidence from advanced and developing countries," Policy Research Working Paper Series 6245, The World Bank.
    14. Farzana Chowdhury & David B. Audretsch & Maksim Belitski, 2019. "Institutions and Entrepreneurship Quality," Entrepreneurship Theory and Practice, , vol. 43(1), pages 51-81, January.
    15. Lee, Seung-Hyun & Peng, Mike W. & Song, Sangcheol, 2013. "Governments, entrepreneurs, and positive externalities: A real options perspective," European Management Journal, Elsevier, vol. 31(4), pages 333-347.
    16. Mike W. Peng & Yasuhiro Yamakawa & Seung–Hyun Lee, 2010. "Bankruptcy Laws and Entrepreneur– Friendliness," Entrepreneurship Theory and Practice, , vol. 34(3), pages 517-530, May.
    17. Maren Forier & Nadine Lybaert & Maarten Corten & Niels Appermont & Tensie Steijvers, 2023. "The flip side of the coin: how entrepreneurship-oriented insolvency laws can complicate access to debt financing for growth firms," European Journal of Law and Economics, Springer, vol. 56(3), pages 461-495, December.
    18. Sadeghi, Ali & Kibler, Ewald, 2022. "Do bankruptcy laws matter for entrepreneurship? A Synthetic Control Method analysis of a bankruptcy reform in Finland," Journal of Business Venturing Insights, Elsevier, vol. 18(C).
    19. Lisa L. Posey & Vickie Bajtelsmit, 2017. "Insurance and Endogenous Bankruptcy Risk: When is it Rational to Choose Gambling, Insurance, and Potential Bankruptcy?," The Geneva Risk and Insurance Review, Palgrave Macmillan;International Association for the Study of Insurance Economics (The Geneva Association), vol. 42(1), pages 15-40, March.
    20. repec:ces:ifodic:v:13:y:2016:i:4:p:19191583 is not listed on IDEAS
    21. Marco Celentani & Miguel García-Posada & Fernando Gómez Pomar, 2022. "Fresh start policies and small business activity: evidence from a natural experiment," Working Papers 2210, Banco de España.

    More about this item

    JEL classification:

    • D23 - Microeconomics - - Production and Organizations - - - Organizational Behavior; Transaction Costs; Property Rights
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • K41 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior - - - Litigation Process
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:hal-01823515. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: CCSD (email available below). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.