Working Paper: CEPR ID: DP878
Authors: Istvan Abel; Konstantine Gatsios
Abstract: This paper looks at simple decision rules in bankruptcy procedures. It describes special issues of enterprise liquidation and reorganization during economic transformation. The reforms of the financial system and other important factors in economic transformation influence the impact of bankruptcy regulation in a way distorting it towards liquidation.
Keywords: bankruptcy; liquidation; reorganization; economic transformation; Hungary
JEL Codes: G33; P51
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| stringent bankruptcy regulations (K35) | likelihood of firm liquidation (G33) |
| costs associated with reorganization (G33) | decision-making process regarding liquidation or reorganization (G33) |
| priority rules established in bankruptcy proceedings (G33) | outcomes for creditors (G33) |
| underdeveloped financial system (P34) | likelihood of firm liquidation (G33) |
| lack of developed capital markets (O16) | liquidation value of firms (G33) |
| costs of reorganization exceed potential profits (G33) | firms opt for liquidation (G33) |
| insufficient debt forgiveness from banks (F65) | likelihood of firm liquidation (G33) |