Title
Legal reform and aggregate small and micro business bankruptcy rates: evidence from the 1997 Belgian bankruptcy code Legal reform and aggregate small and micro business bankruptcy rates: evidence from the 1997 Belgian bankruptcy code
Author
Faculty/Department
Faculty of Applied Economics
Publication type
article
Publication
Dordrecht ,
Subject
Economics
Source (journal)
Small business economics: an international journal. - Dordrecht
Volume/pages
31(2008) :4 , p. 409-424
ISSN
0921-898X
ISI
000260380000006
Carrier
E
Target language
English (eng)
Full text (Publishers DOI)
Abstract
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 codes 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 especially the measures taken to limit domino bankruptcy effects are likely to have had a substantial impact. Our findings have several policy implications for the evaluation and modification of the bankruptcy system.
E-info
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