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Journal Articles European Journal of Law and Economics Year : 2019

Corporate insolvency procedures in England: the uneasy case for liquidations

Abstract

Our paper investigates a comprehensive sample of 574 English corporate insolvency cases, including direct liquidation cases. In contrast to other insolvency procedures, liquidations perform poorly on average and fail to produce satisfactory repayments to creditors. We run multinomial Logit regressions to explain the choice between liquidation and reorganization. We obtain three main results. First, we confirm that size matters: distressed firms owning low assets have higher chances of being liquidated immediately. Second, the presence of secured creditors decreases the risk of direct liquidation. This provides a clue that in England, the most-informed creditors adapt their strategies and turn away from the less-performing procedures. Third, we find that the likelihood of administration—which appears nowadays as the main alternative to direct liquidation—significantly depends on the proportion of fixed/current assets owned by the firms.

Dates and versions

hal-02995633 , version 1 (09-11-2020)

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Cite

Nirjhar Nigam, Regis Blazy. Corporate insolvency procedures in England: the uneasy case for liquidations. European Journal of Law and Economics, 2019, 47 (1), pp.89-123. ⟨10.1007/s10657-018-9599-2⟩. ⟨hal-02995633⟩
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