Recent Comparative Bankruptcy-Related Articles of Interest Available for Downloading from SSRN

The following comparative bankruptcy-related papers, arranged by abstract ID number, can be downloaded from the Social Science Research Network:

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Tillberg University's Harry Huizinga, Int'l Monetary Fund's Luc Laeven, and Free Univ. of Brussels's Gaetan Nicodeme: "Capital Structure and International Debt Shifting."  (Abstract ID: 918460)

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Univ. of Cantabria's Carlos Lopez Gutierrez, Myriam Garcia Olalla, and Begoña Torre Olmo: "Economic Valuation of the Efficiency of Bankruptcy Systems." (Abstract ID: 917784)

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Nottingham Trent University's Adrian Walters and Univ. of Aberdeen's Donna W. McKenzie Skene: "Consumer Bankruptcy Law Reform in Scotland, England and Wales." (Abstract ID: 914552)

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Univ. of N. Dakota School of Law's Jason Jeremy Kilborn: "Out with the New, In with the Old: As Sweden Aggressively Streamlines its Consumer Bankruptcy System, Have U.S. Reformers Fallen Off the Learning Curve?" (Abstract ID: 913096)

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Anuradha Sen: "The Bankruptcy Laws: Comparing Russia, USA, Canada, and UK." (Abstract ID: 912931)

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Catholic Univ. of Leuven's Nico Dewaelheyns and Cynthia Van Hulle: "Legal Reform and Aggregate Small and Micro Business Bankruptcy Rates: Evidence from the 1997 Belgian Bankruptcy Code." (Abstract ID: 905196)

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York University's Iain D.C. Ramsay: "Functionalism and Political Economy in the Comparative Study of Consumer Insolvency: An Unfinished Story from England and Wales." (Abstract ID: 900419)

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Univ. of Bologna's Luca Enriques and Vienna University's Martin Gelter: "How the Old World Encountered the New One: Regulatory Competition and Cooperation in the European Corporate and Bankruptcy Law." (Abstract ID: 887164)

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Bard College's Guillermo Le Fort: "Financial Crisis in Developing Countries and Structural Weaknesses of the Financial System." (Abstract ID: 884718)

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IMF Researcher Se-Jik Kim: "Corporate Leverage, Bankruptcy, and Output Adjustment in Post-Crisis East Asia." (Abstract ID: 880670)

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Harvard University's Kenneth Rogoff and Jeromin Zettelmeyer: "Early Ideas on Sovereign Bankruptcy Reorganization: A Survey." (Abstract ID: 879533)

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Harvard University's Kenneth Rogoff and Jeromin Zettelmeyer: "Bankruptcy Procedures for Sovereigns: A History of Ideas, 1976-2001." (Abstract ID: 879911)

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Abstracts for each of these papers follows:

Harry Huizinga, Luc Laeven, and Gaetan Nicodeme, "Capital Structure and International Debt Shifting."  (Abstract ID: 918460):

This paper presents a model that relates a multinational firm's optimal debt policy to taxation and to non-tax factors such as the desire to prevent bankruptcy. The model yields the predictions that a multinational's indebtedness in a country depends on national tax rates and differences between national and foreign tax rates. These differences matter as multinationals have an incentive to shift debt to high-tax countries. The predictions of the model are tested with the aid of a broad European data set combining firm-level data and information on the international tax treatment of dividend and interest streams. Corporate debt policy indeed appears to reflect national corporate tax rates and international corporate tax rate differences but not non-resident dividend withholding taxes.

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Carlos Lopez Gutierrez, Myriam Garcia Olalla, and Begoña Torre Olmo, "Economic Valuation of the Efficiency of Bankruptcy Systems." (Abstract ID: 917784):

The market valuation of corporate insolvency problems is conditioned by the attributes of bankruptcy laws, with different codes traditionally being oriented toward protecting the debtor or the creditor. Nevertheless, it is also necessary to address the objective of each concrete measure established in the legislation to try to resolve financial distress. This study carries out an approximation, taking into account the different types of efficiency in bankruptcy regulations, the antagonistic character that, on occasions, exists between them, and the market valuation of each one of these, by way of an international analysis undertaken within the main European Union countries.

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Adrian Walters and Donna W. McKenzie Skene, "Consumer Bankrupty Law Reform in Scotland, England and Wales." (Abstract ID: 914552):

As is the case in several other jurisdictions, policymakers in the United Kingdom are seeking to adjust the bankruptcy laws to reflect ever increasing usage of the bankruptcy system by consumer debtors. This paper sketches the existing and emerging consumer bankruptcy systems in Scotland, England and Wales and seeks to assess the fitness for purpose of those systems.

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Jason Jeremy Kilborn, "Out with the New, In with the Old: As Sweden Aggresively Streamlines its Consumer Bankruptcy System, Have U.S. Reformers Fallen Off the Learning Curve?" (Abstract ID: 913096):

Before the dust had settled on the complete overhaul of the U.S. consumer bankruptcy system in October 2005, Sweden remodeled its consumer bankruptcy law on May 19, 2006. After over a decade of trial and error under its 1994 original law, Sweden has just adopted a streamlined new law to make its system more straightforward and efficient. Of particular interest to U.S. readers, Sweden's "original law" functioned very much like the revised consumer bankruptcy system just adopted in the United States. U.S. policymakers should be aware of reforms in parallel systems, like that in Sweden, to avoid falling into the same traps that snared our European neighbors. For example, the failure and abandonment of mandatory credit counseling and informal negotiation with creditors in Sweden seems a likely harbinger of things inevitably to come in the U.S. In addition, Sweden has just ushered in an administrative structure that corresponds almost exactly with proposals that were rejected in the United States in the 1970s. Perhaps it is time to reconsider our rejection of these proposals, at least in part. This article examines the Swedish law "in books" and "in action" as part of an on-going project to chart - in English - the experiences of our European neighbors with new and developing consumer debt relief systems. In undertaking this project, I hope to encourage U.S. policymakers to climb back to the top of the increasingly international learning curve.

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Anuradha Sen, "The Bankruptcy Laws: Comparing Russia, USA, Canada, and UK." (Abstract ID: 912931):

The article delves upon the bankruptcy laws existing in some selected market economies. Some of these are found to protect the interest of the creditors, while others protect the interests of the debtors. Since the problem of bankruptcy has been increasing nowadays in almost all parts of the globe, the issue has been gaining global recognition. In this context, the various laws in economies like U.S.A., Canada, U.K. and Russia are investigated so as to throw some light on the problem of bankruptcy. The legal cultures and the historical background involved with these laws are explored.

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Nico Dewaelheyns and Cynthia Van Hulle, "Legal Reform and Aggregate Small and Micro Business Bankruptcy Rates: Evidence from the 1997 Belgian Bankruptcy Code." (Abstract ID: 905196):

Many Continental European countries recently reformed their bankruptcy legislations to stimulate reorganization and firm survival. We show that the Belgian 1997 bankruptcy code reform, which implemented several international best practice recommendations, significantly reduced aggregate small and micro business bankruptcy rates. However, using distributed lag models to control for the relationship between bankruptcy rates and macroeconomic variables such as real GDP growth, consumer confidence, inflation, etc., we find that the new code's impact is not the same for all types of companies. Specifically, while the beneficial effect of the reform is largely similar between small firms (i.e. stock corporations) and micro firms (i.e. partnerships), it is only significant in certain industries (manufacturing and trade). Overall, our results indicate that solely the reforms aimed at limiting domino bankruptcy effects have had a substantial impact. Our findings have several policy implications for the evaluation and modification of the bankruptcy system.

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Iain D.C. Ramsay, "Functionalism and Political Economy in the Comparative Study of Consumer Insolvency: An Unfinished Story from England and Wales." (Abstract ID: 900419):

This article is divided into two parts. The first part reflects on the dominant functionalist approach to comparative consumer bankruptcy and suggests that this might be supplemented by a political economy analysis that addresses the role of national and international interest groups, including professionals, and ideology in understanding different national responses to overindebtedness in North America and Europe. The second part examines current reforms to consumer bankruptcy and responses to overindebtedness in the UK through this political economy lens and concludes that competition among professional groups, the role and interests of the Insolvency Service, and the ideology of the Third Way in consumer policy will influence the ultimate structure adopted for addressing consumer insolvency. A study of the English experience suggests that there is also an element of national path dependency to consumer insolvency reform that may resist pressures towards convergence of approaches between countries in addressing issues of consumer insolvency

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Luca Enriques and Martin Gelter, "How the Old World Encountered the New One: Regulatory Competition and Cooperation in the European Corporate and Bankruptcy Law." (Abstract ID: 887164):

The European framework for creditor protection has undergone a remarkable transformation in recent years. While the ECJ’s Centros case and its progeny have given EU businesses free choice with respect to the state of incorporation, and hence to the substantive corporate law regime, the European Insolvency Regulation has introduced uniform conflict of laws rules for insolvencies. However, this regime has opened up some forum shopping opportunities for corporate debtors. Both regulatory competition in corporate law and forum shopping in bankruptcy law have been discussed in the US for years, while they are relatively new territory in the EU. This article attempts to pull together the two emerging discussions and analyzes possible consequences for the relationship between shareholders, managers and creditors in European corporations. We argue that, in the absence of evidence of either a race to the top or the bottom, we cannot rule out adverse consequences of either regulatory competition in corporate law or forum shopping in bankruptcy. However, the discussion so far has largely considered only the consequences of the first type of regulatory arbitrage while neglecting the second. Hence, the issue of the “insolvencification” of corporate law rules has been brought up in order to enable national policymakers to impose their respective ideas about creditor protection on firms. We suggest that such attempts may be futile. First, relabeling is possible only to a rather limited degree, and second, while restricting the scope for corporate law arbitrage, it increases the incentives for forum shopping in bankruptcy. Ultimately, it may even backfire, leading to a higher degree of bankruptcy forum shopping to avoid the very rules that have been insolvencified.

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Guillermo Le Fort, "Financial Crisis in Developing Countries and Structural Weaknesses of the Financial System." (Abstract ID: 884718)

This paper examines the generation of financial crises in developing economies and shows that the microeconomic structure of the financial sector is a crucial factor in creating the conditions for a crisis. Structural problems of the financial system in developing countries, including implicit insurance on bank liabilities, limitations of capital markets, and lack of appropriate regulations, are sources of financial fragility. The paper concludes that close supervision of bank loans is needed to eliminate these distortions, and the optimal intervention consists of imposing an adjustable bankruptcy penalty on banking activity or charging a fair insurance premium on bank liabilities.

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Se-Jik Kim, "Corporate Leverage, Bankruptcy, and Output Adjustment in Post-Crisis East Asia." (Abstract ID: 880670):

Different levels of corporate leverage are used in this paper to help explain the wide range of post-crisis output adjustment across East Asia. In the model developed here, highly leveraged firms facing a cutoff of capital inflows are threatened by bankruptcy. These firms respond by eliminating investment and selling their capital goods-at a discount-to try to stay afloat. Lower investment and wasteful capital sales shrink the aggregate capital stock, trigger deflationary pressures, and contract overall output. The available data are broadly consistent with the assumptions and predictions of the model.

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Kenneth Rogoff and Jeromin Zettelmeyer, "Early Ideas on Sovereign Bankruptcy Reorganization: A Survey." (Abstract ID: 879533):

This paper surveys early intellectual antecedents of the Krueger (2001) proposal for creating bankruptcy reorganization procedures at the international level. We focus on actual proposals for new procedures made from the late 1970s up to an influential lecture by Sachs (1995), with brief reference to the formal economics literature on sovereign debt. Beginning with a paper by Oechsli (1981), several key contributions are made during this period, including the analogy with domestic bankruptcy procedures, an understanding of the inefficiencies in international lending that might justify such procedures, and specific institutional and legal suggestions that continue to play a role in the current debate.

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Kenneth Rogoff and Jeromin Zettelmeyer, "Bankruptcy Procedures for Sovereigns: A History of Ideas, 1976-2001." (Abstract ID: 879911) :

This paper describes the evolution of ideas to apply bankruptcy reorganization principles to sovereign debt crises. Our focus is on policy proposals between the late 1970s and Anne Krueger`s (2001) proposed Sovereign Debt-Restructuring Mechanism, with brief reference to the economics literature on sovereign debt. We describe the perceived inefficiencies that motivate proposals, and how proposals seek to change debtor and creditor incentives. We find that there has been a moving concensus on what constitutes the underlying problem, but not on how to fix it. The range of proposed approaches remains broad and only recently shows some signs of narrowing.

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© Steve Jakubowski 2006

Written By:JoeMastrianoCPA On May 25, 2010 7:13 AM

Excellent topic and point of view about bankruptcy! Thanks for the share.