Did the establishment of specialised courts affect the frequency of business bankruptcy petitions in Spain?

Spanish small businesses rarely file for bankruptcy, and Spanish bankruptcy rates are among the smallest in the world. The historical inadequacy of the Spanish insolvency system has led most enterprises to rely on the de facto alternative mortgage system, which implies, among other things, overinvestment by debtors in fixed tangible assets. This latter effect can be particularly detrimental to the enabling environment of novel entrepreneurship. It is therefore of interest to examine whether the change in the bankruptcy regime that took place in Spain some ten years ago, with the establishment of specialised commercial courts (Juzgados de lo Mercantil), had any positive effect on bankruptcy rates. In this paper, the staggered timing of the new courts establishment is exploited in order to estimate an endogenous treatment model with a binary policy variable. The results support the direction of the reform, but the size of the estimated parameter suggests further efforts in that direction.