Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany, and the UK

Davydenko, Sergei A.; Franks, Julian R.

doi:10.2139/ssrn.647861

Cited by 192 publications

(185 citation statements)

References 28 publications

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“…Subsequent work suggests that these deviations result from equity's holdup power, the legal right of equityholders in Chapter 11 to delay or prevent the adoption of a plan of reorganization (Bebchuk and Chang, 1992;and Bebchuk, 2002). Bankruptcy distributions in jurisdictions that do not provide equity with similar holdup power are generally consistent with creditors' priority rights (Franks, Nyborg, and Torous, 1996;Davydenko and Franks, 2006).…”

Section: Article In Pressmentioning

confidence: 99%

Renegotiation of cash flow rights in the sale of VC-backed firms

Broughman

Fried

2010

Journal of Financial Economics

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a b s t r a c tIncomplete contracting theory suggests that venture capitalist (VC) cash flow rights, including liquidation preferences, could be subject to renegotiation. Using a handcollected data set of sales of Silicon Valley firms, we find common shareholders do sometimes receive payment before VCs' liquidation preferences are satisfied. However, such deviations from VCs' cash flow rights tend to be small. We also find that renegotiation is more likely when governance arrangements, including the firm's choice of corporate law, give common shareholders more power to impede the sale. Our study provides support for incomplete contracting theory, improves understanding of VC exits, and suggests that choice of corporate law matters in private firms.

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Section: Article In Pressmentioning

confidence: 99%

Renegotiation of cash flow rights in the sale of VC-backed firms

Broughman

Fried

2010

Journal of Financial Economics

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“…Antoniou, Guney and Paudyal (2002) investigate the determinants of leverage for French, German and British firms using panel data with a focus on the convergence of capital structure to a target maturity structure. A historical perspective on the evolution of the US and UK codes is provided by Franks and Sussman (2005), while Davydenko and Franks (2008) analyze the effect of bankruptcy codes in France, Germany and the UK on the recovery rates and collateral requirements of bank-based contracts.…”

Section: The Related Literaturementioning

confidence: 99%

“…In some countries, the code overwhelmingly favors debtholders, particularly secured debtholders. To quote Davydenko and Franks (2008) on the UK code:…”

Section: Introductionmentioning

confidence: 99%

Cross-country variations in capital structures: The role of bankruptcy codes

Acharya

Sundaram

John

2011

Journal of Financial Intermediation

114

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We investigate the impact of bankruptcy codes on firms' capital-structure choices. We develop a theoretical model to identify how firm characteristics may interact with the bankruptcy code in determining optimal capital structures. A novel and sharp empirical implication emerges from this model: that the difference in leverage choices under a relatively equity-friendly bankruptcy code (such as the US's) and one that is relatively more debt-friendly (such as the UK's) should be a decreasing function of the anticipated liquidation value of the firm's assets. Using data on the US and the UK over the period 1990 to 2002, we subject this prediction to both parametric and nonparametric tests, using different proxies for liquidation values and different measures of leverage. In support for the theory, we find that our proxies for liquidation value are both statistically and economically significant in explaining leverage differences across the two countries. In contrast, many of the other factors that are known to affect within-country leverage (e.g., size) cannot explain differences in leverage across countries.

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“…Empirical study shows that, disclosing facts about pay back of loans and the future interest cost did not moderate the undesirable effects of presenting minimum information [26]. Evidence suggesting that better disclosure and reporting can be beneficial to capital markets, for instance, by reducing information asymmetries, increasing liquidity, and lowering the cost of capital [27].…”

Section: Introductionmentioning

confidence: 91%

http://www.omicsgroup.org/journals/egovernment-success-factors-views-of-saudiprofessionals-2169-026X-1000128.php?aid=48970

Aiman¹

2013

J Entrepren Organiz Manag

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Effects of Legal and Cultural Attachments on Microfinance Capital StructureUmme-E-Aiman* and Habib Ahmad Department of Finance and Financial Management, Foundation University, Rawalpindi, Pakistan transfers [1]". Many of those who promote microfinance generally believe that such access will help poor people out of poverty, including participants in the Microcredit Summit Campaign. This study aims to identify the impact of legal traditions, creditor rights and financial sector development on capital structure of MFIs. Literature ReviewThere are hardly few articles concerning the financing procedures and capital structure which focuses on the issue of creditors' rights, depositor protection and legal traditions and terms for microfinance institutions. Microfinance institutions cover an extensive range of funders that differ in terms of legal traditions, objectives, target market and approach style. CGAP research (2011) shows that despite of tensed budgets and worldwide financial crises, the levels of cross-border funding continued to increase, but at a much lower growth rate [4].Researchers have a grade contribution regarding the relation between finance and law and finance sector development. They found that when the outside investors are not adequately protected with the help of legal framework offered by a country in the result of which entrepreneurs and actual owners are forced to sustain big positions themselves to line up their incentives with other investors [5]. More clearly, countries with weak investor protection should have more intense ownership structures. Hubert Tchakoute Tchuigoua in his article of 2014 says that AbstractPurpose: The basic intention behind this article is to find that how legal bindings and financial developments sector influence the capital structure of micro finance institutions.Design/methodology/approach: Panel data of 87 countries is used in the analysis from 2004 to 2013 with annual frequency. Random effect is used after Hausman specification. Findings:Result shows that good and prudential legal tradition, may pave way for foreign investments by gaining trust and in this way economic development of country move towards progress. But one variable (depth of credit information) shows inverse relationship with leverage. This is because some time when MFIs fully disclose their financial structures and terms and conditions, they fail to get the investors' confidence because of gap between investors and MFIs interests.Originality/value: We found limited research work which has been carried out to answer the question that how capital structure respond to the legal traditions and geographical bindings of country.

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Do Bankruptcy Codes Matter? A Study of Defaults in France, Germany, and the UK

Cited by 192 publications

References 28 publications

Renegotiation of cash flow rights in the sale of VC-backed firms

Renegotiation of cash flow rights in the sale of VC-backed firms

Cross-country variations in capital structures: The role of bankruptcy codes

http://www.omicsgroup.org/journals/egovernment-success-factors-views-of-saudiprofessionals-2169-026X-1000128.php?aid=48970

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