Going Bankrupt in China Li, Bo; Ponticelli, Jacopo
Review of Finance,
05/2022, Volume:
26, Issue:
3
Journal Article
Peer reviewed
Abstract
Using a new case-level dataset, we document a set of stylized facts on bankruptcy in China and study how the staggered introduction of specialized courts across Chinese cities affected ...insolvency resolution and the local economy. For identification, we compare bankruptcy cases handled by specialized versus traditional civil courts within the same city and filed in the same year. We find that specialized courts decrease case duration by 36% relative to traditional civil courts. We provide evidence consistent with court specialization increasing efficiency via selection of better trained judges and higher judicial independence from local politicians. We document that cities introducing specialized courts experience a relative reallocation of employment out of zombie firms-intensive sectors, as well as faster firm entry and a larger increase in average capital productivity.
Ukraine is making an effort to improve their positions in the rating «Doing Business», however, for most indicators, the results are much lower than in Europe and Central Asia. One of these troubling ...indicators is the «resolving insolvency».
Drawing on qualitative empirical research, this Article reports and explains the unusual role of insurance in mass tort litigation. In contrast to ordinary tort, corporate governance, and securities ...litigation: (!) mass tort plaintiff lawyers do not build their litigation and settlement strategy around defendants liability insurance, except in the insolvency or near-insolvency context; (2) mass tort defendants typically retain control over their defense, even when they recover under insurance policies that assign the insurer control over their defense; (3) mass tort defendants typically use their own funds to settle claims, obtaining indemnification from their liability insurers, if any, later; and (4) many mass tort plaintiff law firms rely on non-recourse litigation funding that resembles the earliest forms of commercial insurance-bottomry and respondentia-and there is an emerging insurance market that reduces the cost of this funding and may one day supplant it. In addition to providing a new understanding of the role of insurance in mass tort litigation, this research provides empirical support for two of the conceptual insights in Kenneth Abrahams The Liability Century: (1) the mismatch between product liability and product liability insurance that emerged near the end of the twentieth century and (2) the increasingly insurance-like function of tort law.
We use data on individual investment decisions to analyze whether investors in equity crowdfunding direct their investments to local firms and whether specific investor types can explain this ...behavior. We then examine whether investments exhibiting a local bias are more or less likely to fail. We show that investors exhibit a local bias, even when we control for those with personal ties to the entrepreneur. In particular, we find that angel‐like investors and investors with personal ties to the entrepreneur exhibit a larger local bias than regular crowd investors. Well‐diversified investors are less likely to suffer from this behavioral anomaly than investors with personal ties to the entrepreneur. Overall, we show that investors who direct their investments to local firms more often pick start‐ups that run into insolvency, which indicates that some local investments in equity crowdfunding constitute a behavioral anomaly rather than a rational preference. Moreover, our results reveal that platform design is an important factor determining the scope of the behavior anomaly.
Business bankruptcy in China is governed by the Enterprise Bankruptcy Law (EBL), a national insolvency code enacted in 2007. The EBL contains provisions for business liquidation, reorganization, and ...compromise of debt. Although adjustment of debt through bankruptcy is far less common in China than in western nations, Chinese courts have established a body of bankruptcy procedures and judicial interpretations that give insolvency in China a measure of predictability and effectiveness. Notwithstanding the EBL provisions, soon after the onset of the pandemic, PRC courts began to adopt ad‐hoc rules and guidelines in bankruptcy cases for businesses whose financial woes were caused or exacerbated by coronavirus, or for enterprises that produced medical equipment and supplies to help prevent and control the virus. This paper examines these court measures, explores their political and judicial context, and demonstrates how they produced bankruptcy outcomes that were often significantly different than what would have resulted if the EBL had been applied based on pre‐COVID‐19 EBL practices.
Insolvency and business recovery laws in Nigeria have not evolved to incorporate reorganisation, reforming insolvent oil firms' operations to boost commercial oil firms' steadiness and economic ...suitability like other moderately developed countries. In Nigeria, liquidation is understood by many as the panacea to indebtedness. The research evaluates the Nigerian insolvency and business recovery legal regime to sustain indebted oil firms from economic shocks due to the global decline in the oil price to avert imminent business failures due to insufficient cash flows. The aim is to fill the gaps in Nigeria's insolvency and business recovery laws by recommending a model for the sustenance of oil firms and to suggest the reform of the gaps identified in the existing laws and the extant literature on the subject. The paper opted for conceptual legal review, comparative legal and policies analyses of solvency and business recovery legislations in Nigeria, Malaysia, India, South Africa, the United Kingdom and the United States. These nations were designated for this study because their insolvency and business recovery legal regime are business rescued driven, not winding up centred. The study is library research-based to address some of the flaws in Nigeria's insolvency and business recovery laws. The study finds that Nigerian legislation on insolvency is flawed in oil firms' salvage, improvement and rearrangement. It ends that, statutory bodies in the designated case study nations are efficient than those in Nigeria due to the strong political will of their governments in supporting insolvent oil firms for successful financial recovery, to safeguard jobs, to protect creditors and to enhance the wealth of their nations through sound business recovery policies and laws. The study, advocates, remodel of Nigeria's insolvency and business recovery legislations and policies in compliance with the international standards on insolvent oil firms salvaged and creditors focused policies for a robust economy. The study concludes with the recommendation for further study to consider quantitative analysis research methodology to project further scholarship on the subject.
Nigeria, Oil Firms, Creditor, Insolvency and Business Recovery laws.
•We carried out an analysis of 344 construction firms in Majorca over seven years.•We used ‘pooled ordered probit’ and ‘pooled probit regressions’ methodologies to fit the models.•Lower accident ...rates can improve company earnings.•Evidence of the higher the accidents in a company the lower its probability of survival.•The risk of bankruptcy increases as the number of accidents rises.
Introduction: This paper examines the relationships between the reported accidents of workers in construction firms and the probability of those firms’ survival. Method: Between 2004 and 2010, a sample of 344 Spanish construction firms from Majorca were selected. The study built panel data with the reported official accidents from the Labor Authority records and the firm survival or mortality from the Bureau van Dijḱs Iberian Balance Sheet Analysis System database. The hypothesis is that a higher number of accidents directly affects the probability of the company surviving in the sector. By using a probit regression model with panel data, the relationship between these two variables were explored to test the hypothesis. Results: The study found evidence that an increment in accidents decreases the probability of the company continuing to operate, or worse, going bankrupt. The results can be useful to highlight the importance of defining policies to control those accidents effectively, since this may be a key factor in the sustainability, competitiveness, and growth of the construction sector for the economy of a region.
We examine the relationship between growth opportunities and insolvency risk in a mediating framework through financing decisions for 330 listed firms on the Pakistan Stock Exchange (PSX) This study ...covers a data period of five years ranging from 2013 to 2017. Financing decisions used in this study involve capital structure decision and debt maturity decision. We applied robust clustered panel OLS regression to the data and found a negative relationship between growth opportunities and insolvency risk in all samples consisting of overall, large and small firms. Growth opportunities have a negative impact on the capital structure, but debt maturity was influenced positively. Financing decisions influenced the insolvency risk positively. We used Baron and Kenny’s (1986) approach to detect the intervening effects of financing decisions. Further, Sobel’s test used to check the significance of mediation. Partial mediation was found for the debt maturity ratio in the large and overall sample of firms. However, the capital structure did not mediate the relationship between growth opportunities and insolvency risk in this study.
Bibliometric analysis is an effective method to carry out quantitative study of academic output to address the research trends on a given area of investigation through analysing existing documents. ...This paper aims to explore the application of intelligent techniques in bankruptcy predictions so as to assess its progress and describe the research trend through bibliometric analysis over the last five decades. The results indicate that, although there is a significant increase in publication number since the 2008 financial crisis, the collaboration among authors is weak, especially at the international dimension. Also, the findings provide a comprehensive view of interdisciplinary research on bankruptcy modelling in finance, business management and computer science fields.
The authors sought to contribute to the theoretical development of bankruptcy prediction modeling by bringing new knowledge and key insights. Artificial intelligent techniques are now serving as important alternatives to statistical methods and demonstrate very promising results. This paper has both theoretical and practical implications. First, it provides insights for scholars into the theoretical evolution and intellectual structure for conducting future research in this field. Second, it sheds light on identifying under-explored machine learning techniques applied in bankruptcy prediction which can be crucial in management and decision-making for corporate firm managers and policy makers.
Business; Business failure; Bibliometric; Bankruptcy prediction; Financial distress; Artificial intelligence; Insolvency
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