Why Do Spanish Firms Rarely Use the Bankruptcy System? The Role of the Mortgage Institution

Abstract

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An Analysis of Productivity Performance in Spain Before and During the Crisis

“…They appear significantly lower than those in the UK and Germany, while those in France are somewhat lower (Davydenko and Franks, 2008). However, these data are difficult to compare (García-Posada and Mora-Sanguinetti, 2012). Lengthy procedures lower credit recovery rates.…”

“…This institutional framework may discourage business risk-taking and innovation, with repercussions on productivity growth. As found in García-Posada and Mora-Sanguinetti (2012) this is partly related to the use of the mortgage system to secure loans, which may encourage firms to overinvest in tangible fixed assets (real estate, land, plant and machinery) with potentially negative impacts on productivity. An efficient bankruptcy system aims at two diverging objectives, the protection of creditors' rights and the protection of the enterprise from liquidation, if the latter is beneficial for the economy.…”

Successful turnarounds in bankrupt firms? Assessing retrenchment in the most severe form of crisis

“…Spain is characterized by, at least, two aspects. On one hand, firms rarely enter into a bankruptcy procedure (García-Posada & Mora-Sanguinetti, 2012). On the other hand, the effectiveness of the bankruptcy system is much lower than that of other developed countries (García-Posada & Vegas, 2016).…”

Fostering innovative business investment in Spain

“…Until recently, the design of the Spanish insolvency regime has led to costly and lengthy insolvency proceedings (OECD, 2014b). In Spain, bankruptcy procedures took around 24 months and up to 36 months during the crisis, compared to around a year in France and the United Kingdom (García-Posada and Mora-Sanguinetti, 2012). This meant that secured creditors typically foreclosed on loans and seized collateral, providing few opportunities for marginal firms to restructure through formal insolvency procedures (García-Posada and Mora-Sanguinetti, 2014b).…”