ISSN 2385-2275 No. 24 - July 2016
Debt Recovery in Firm Liquidations: Do Liquidation Trustees Matter?
Jaka Cepec
Faculty of Economics, University of Ljubljana, 1000 Ljubljana, Slovenia
Peter Grajzl
Department of Economics, The Williams School of Commerce, Economics, and Politics, Washington and Lee University, Lexington, VA 24450, USA and CESifo, Munich, Germany
Katarina Zajc
Faculty of Law, University of Ljubljana, 1000 Ljubljana, Slovenia
Abstract
Insolvency systems play a crucial role in protection of creditor rights, yet micro-level empirical evidence on the functioning of insolvency regimes worldwide is sparse. We investigate whether creditors' recovery of outstanding claims, a measure of ex-post efficiency of an insolvency regime, depends on the characteristics of the trustee delegated the administration of the liquidation proceedings. To this end, we draw on a novel dataset of firm liquidations from Slovenia and exploit courts' de facto random assignment of firm liquidation cases to licensed liquidation trustees. Using a wide range of specifications and controls, we find that a subset of trustee characteristics indeed matters for debt recovery. Thus, ex-post efficiency of an insolvency regime depends not only on its formal rules and procedures, but also on who implements them in practice.
Keywords: insolvency, firm liquidations, debt recovery, liquidation trustees, Slovenia
JEL Classifications: G33, K22, P37