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Corporate Bankruptcy and the (In-)Efficiency of Small Commercial Courts

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  • Anne Épaulard

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique)

  • Chloé Zapha

    (LEDa - Laboratoire d'Economie de Dauphine - IRD - Institut de Recherche pour le Développement - Université Paris Dauphine-PSL - PSL - Université Paris Sciences et Lettres - CNRS - Centre National de la Recherche Scientifique, Banque de France - Banque de France)

Abstract

This paper assesses the efficiency of small commercial courts. We take advantage of a reform that regroups small commercial courts and estimate its impact on firms' bankruptcy outcomes on the quality of rulings in bankruptcy cases. A conceptual framework allows us to derive the impact of the reform on Type 1 error (restructuring a non-viable firm) and Type 2 error (liquidating a viable firm) from estimated coefficients of a set of difference-in-difference equations. We apply this strategy to an (almost) exhaustive sample of 600~000 bankruptcy cases in France that started between 2000 and 2019. We show that the reform unambiguously reduced Type 1 errors for small firms in absorbed court and left unchanged Type 2 errors. We show that the behavior of the absorbing commercial court now applies to firms that belong to the catching areas of absorbed commercial courts.

Suggested Citation

  • Anne Épaulard & Chloé Zapha, 2023. "Corporate Bankruptcy and the (In-)Efficiency of Small Commercial Courts," Working Papers hal-04214904, HAL.
    • Handle: RePEc:hal:wpaper:hal-04214904
    Note: View the original document on HAL open archive server: https://hal.science/hal-04214904
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    Keywords

    Corporate Bankruptcy; Commercial Courts;

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