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Article
Publication date: 9 June 2021

Fahad Alarifi

The purpose of the paper is to analyze the new Bankruptcy Law in Saudi Arabia (KSA Bankruptcy Law) under both a comparative lens and a policy-oriented one, while…

Abstract

Purpose

The purpose of the paper is to analyze the new Bankruptcy Law in Saudi Arabia (KSA Bankruptcy Law) under both a comparative lens and a policy-oriented one, while highlighting some of the most essential operational steps and procedures in a bankruptcy proceeding under the law.

Design/methodology/approach

The approach adopted analyzes the specific mechanics and procedures of a bankruptcy law under the general policies and goals of bankruptcy. Additionally, where appropriate, a brief comparison to the US Bankruptcy code and its provisions is presented to provide an alternative approach on how similar issues are handled under a reputable and proven bankruptcy system.

Findings

Overall, the KSA Bankruptcy Law is a major accomplishment and advancement to the Kingdom’s insolvency regime. The law consolidated and codified the laws governing bankruptcy under the Kingdom’s prior regime, and followed the structure of a modern bankruptcy regime. In doing so, several of the law’s policies and objectives have been fulfilled by providing an effective, predictable and reliable bankruptcy system.

Originality/value

Given the relatively recent adoption of the KSA Bankruptcy Law, the paper provides a comprehensive assessment of the law’s operation and its effectiveness in achieving its policy goals as a modern bankruptcy law.

Details

PSU Research Review, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2399-1747

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Article
Publication date: 14 May 2018

Hamiisi Junior Nsubuga

This paper aims to highlight how an interpretative approach to law as posited by Dworkin may be used to remedy the tension between employment protection and corporate rescue laws.

Abstract

Purpose

This paper aims to highlight how an interpretative approach to law as posited by Dworkin may be used to remedy the tension between employment protection and corporate rescue laws.

Design/methodology/approach

This paper adopts a doctrinal and theoretical approach to law.

Findings

The tension between corporate rescue and employment protection laws affects both employees’ and business owners’ policy objectives on corporate insolvency. The theoretical perspectives of both the traditionalists and proceduralists have so far failed to provide a clear approach on how this tension may be balanced or remedied. This paper proposes that this tension may be remedied through interpretation, that is, by adopting Dworkin’s Interpretative Approach to Law.

Originality/value

Most researchers and academics have written extensively about the tension between corporate rescue and employment protection, but this paper is the first of its kind to propose a remedy to this tension through interpretation.

Details

International Journal of Law and Management, vol. 60 no. 3
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 5 September 2020

Shakti Deb and Indrajit Dube

This paper aims to revisit the Indian experience on corporate bankruptcy law to answer “why Indian corporate insolvency law structured differently from a manager-driven…

Abstract

Purpose

This paper aims to revisit the Indian experience on corporate bankruptcy law to answer “why Indian corporate insolvency law structured differently from a manager-driven (pre-Insolvency Code) to manager-displacing model (post-Insolvency Code)?”

Design/methodology/approach

This paper is qualitative in nature. The paper analyses the prevailing theoretical wisdom in corporate insolvency law in India and examines the practices of Indian bankruptcy regime.

Findings

The authors argued, considering the corporate ownership composition, the Insolvency and Bankruptcy Code 2016 will not accomplish the intended objective (i.e. the “creditor primacy”). The findings refute with the evolutionary theory, i.e. debt and equity both will tend towards dispersion in outsider system of governance.

Originality/value

This paper put forward the imprint that Indian corporate insolvency regime is manager-displacing under Law on Books and manager-driven under Law on Practice.

Details

International Journal of Law and Management, vol. 63 no. 1
Type: Research Article
ISSN: 1754-243X

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Article
Publication date: 1 April 2014

Amanda E. Dawsey

The purpose of this paper is to explore the impact of creditors' undervaluing the total expected cost of a borrower's bankruptcy filing because a portion of the cost will…

Abstract

Purpose

The purpose of this paper is to explore the impact of creditors' undervaluing the total expected cost of a borrower's bankruptcy filing because a portion of the cost will be borne by other lenders. Creditors who bear a smaller portion of the total cost of a personal bankruptcy would be expected to take less care to avoid triggering one.

Design/methodology/approach

This paper presents a theoretical model of a creditor's decision of how aggressively to pursue collection. The model shows that because each lender's collection actions increase the probability of bankruptcy, each lender will collect more aggressively when a borrower has many loans. The paper tests the predictions of the model using a large dataset of credit card accounts.

Findings

The model highlights an important testable result: holding the level of debt constant, a borrower with many loans is more likely to choose formal bankruptcy and less likely to choose informal bankruptcy, i.e. chronic non-repayment absent a bankruptcy filing. This paper finds evidence that strongly supports the predictions of the model. Laws that limit creditor collection actions do not appear to mitigate the effects of increasing number of loans.

Originality/value

While a few papers have tested whether strategic interactions may impact business bankruptcy, no paper of which the author is aware has provided clear empirical evidence of the existence of common pool effects in the personal credit market. These effects point to an important and potentially underappreciated source of risk for borrowers and creditors in this market.

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Book part
Publication date: 11 December 2007

Mirko Cvetkovic, Alexander Pankov and Andrej Popovic

Two factors explain why the Serbian privatization experience deserves close attention from outside world. First, Serbia's starting conditions for privatization, with a…

Abstract

Two factors explain why the Serbian privatization experience deserves close attention from outside world. First, Serbia's starting conditions for privatization, with a historical tradition of workers’ management, strong trade unions, and an ambivalent initial attitude toward privatization, have as much in common with circumstances surrounding privatization in the developing countries as with those in the so-called economies in transition. Second, Serbia embarked on a resolute privatization path only in 2001, following more than 10 years of diverse privatization efforts in other post-socialist economies of the region. This makes Serbia a perfect case study of how a country can learn from the experience (both positive and negative) of other reformers.

Details

Privatization in Transition Economies: The Ongoing Story
Type: Book
ISBN: 978-1-84950-513-0

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Book part
Publication date: 23 November 2015

Nicolae Stef

In bankruptcy, a reorganization procedure is based on the terms of a reorganization plan aimed to save a financially distressed firm. We provide an original approach of…

Abstract

In bankruptcy, a reorganization procedure is based on the terms of a reorganization plan aimed to save a financially distressed firm. We provide an original approach of the reorganization plan that we treated as a future contract that demands to creditors a certain degree of cost sharing. This paper examines how the sharing of the reorganization plan costs influences the bankruptcy outcome of such firm.

The sharing of the costs between creditors and debtor is analyzed by a static theoretical model that uses a Lagrangian approach.

We show that debtors have strong incentives to propose reorganization plans which provide an expected gain for creditors higher than the liquidation value of the firm and lower than the payment of the reorganization plan with an optimal sharing degree. Hence, a reorganization plan can be rejected by creditors if the sharing degree is too important.

The liquidation of the firm can be avoided if the design of the reorganization plan is improved by performing an appraisal or purchasing the services of an audit company.

The novelty of this paper resides in the distinction of two types of bankruptcy legal systems. The first one represents a pro-creditor or a creditor-friendly bankruptcy system in which the claimants’ payment is not limited to a fixed value written in the reorganization plan. Conversely, we treated the case of a debtor-friendly bankruptcy system which limits the creditors’ payment. The results of our model hold independently of the bankruptcy law orientation, that is, pro-creditor or pro-debtor.

Details

Economic and Legal Issues in Competition, Intellectual Property, Bankruptcy, and the Cost of Raising Children
Type: Book
ISBN: 978-1-78560-562-8

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Book part
Publication date: 30 October 2018

FR. Oswald A. J. Mascarenhas, S.J.

Before the September–October 2008 Financial Crisis, investment banks were hooked on debt. In 2007, a year before its failure, Lehman Brothers held equity just 3.3% of its…

Abstract

Executive Summary

Before the September–October 2008 Financial Crisis, investment banks were hooked on debt. In 2007, a year before its failure, Lehman Brothers held equity just 3.3% of its balance sheet (that is, its debt/equity ratio well exceeded 29); virtually all the rest was financed by borrowing. Leverage is an elixir that makes profits soar when times are good but magnifies losses when the economy sours. Currently in India, several companies have seen their balance sheet out of shape because of overleverage, but banks continue to be benevolent, often forced by political interventions (see Cases 6.1 and 6.2). Most of these business groups are nearly dead, with their equity almost wiped out. There is little chance they will survive but for their banker’s largesse. Ever-greening of loans is keeping them alive, but what could be the end game? For instance, just a year before economic liberalization in India, few enterprising men invested in the steel business. They borrowed monies from the banks and banks continued to finance their operations, and now they are realizing that the promoters cannot meet with their debt obligations. The banks, however, did not want to accept financial loss and hence commonly agreed to ease the payment obligations so that the loans remained good and not degenerate to NPAs. This is tantamount to refinancing to service your loans. But now the banks overwhelmed with accumulated NPAs are trying to sell debt. How do you legally, ethically, morally, and spiritually (LEMS) justify share-market concentration in the hands of very few promoter investors? What are their long-run unintended economic, legal, ethical, and moral consequences, and why? This chapter studies this market turbulence and the role of bankruptcy laws and court systems in bringing about some change in the debt-overleveraged corporations.

Details

Corporate Ethics for Turbulent Markets
Type: Book
ISBN: 978-1-78756-187-8

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Article
Publication date: 14 October 2013

Dennis Lai Hang Hui

The purpose of this paper is to explore the origin of the development of insolvency laws in China and Russia and explores the evolving role of the states in the…

Abstract

Purpose

The purpose of this paper is to explore the origin of the development of insolvency laws in China and Russia and explores the evolving role of the states in the legislative process.

Design/methodology/approach

The study is conducted based on the analysis of historical materials and the relevant secondary sources written in Chinese and Russian.

Findings

The paper argues that the development of the insolvency laws in China and Russia underlines the diverging perceptions by the states about the ways to improve economic performance through reforming their respective state enterprise system. On the other hand, the unsatisfactory utilisation of the laws in the these countries revealed the incompleteness of the wider institutional reform that opened up possibilities for predatory exploitations and corruptive practices which in turn upset the market-building in these developing economies.

Originality value

This study highlights that by bring back the state into the analysis, the competing ideas, interests and institutions in the development of insolvency laws can be identified.

Details

Asian Education and Development Studies, vol. 2 no. 3
Type: Research Article
ISSN: 2046-3162

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Book part
Publication date: 15 August 2002

James Boyd

Financial assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the…

Abstract

Financial assurance rules, also known as financial responsibility or bonding requirements, foster cost internalization by requiring potential polluters to demonstrate the financial resources necessary to compensate for environmental damage that may arise in the future. Accordingly, assurance is an important complement to liability rules, restoration obligations, and other regulatory compliance requirements. The paper reviews the need for assurance, given the prevalence of abandoned environmental obligations, and assesses the implementation of assurance rules in the United States. From the standpoint of both legal effectiveness and economic efficiency, assurance rules can be improved. On the whole, however, cost recovery, deterrence, and enforcement are significantly improved by the presence of existing assurance regulations.

Details

An Introduction to the Law and Economics of Environmental Policy: Issues in Institutional Design
Type: Book
ISBN: 978-0-76230-888-0

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Article
Publication date: 18 June 2019

Mevliyar Er

The purpose of this paper is to investigate to what extent the increased insolvency filings by migrants since the enactment of the consumer insolvency law in 1999 is…

Abstract

Purpose

The purpose of this paper is to investigate to what extent the increased insolvency filings by migrants since the enactment of the consumer insolvency law in 1999 is associated with moral hazard. It describes the profile of migrant debtors and highlights the areas of moral hazard. This study aims to propose changes to the consumer bankruptcy system.

Design/methodology/approach

Empirical evidence for this work consists of primary data from 435 individuals mainly with immigration background, who were declared bankrupt by district courts (Amtsgericht). Both qualitative and quantitative research types were used. Interviews helped to attain an in-depth understanding of the way in which any misconduct may take place. Quantitative data were gathered to understand the debt profile of migrant debtors, types of liabilities and creditors’ reactions to write-off requests.

Findings

The paper provides empirical insights about the way misconduct is pursued and suggests that neither party, i.e. the debtors through debt counsellors and creditors/factoring companies or their representatives, is entirely free of unethical practice. Hence, the paper stresses the need to establish public agencies, which provide joint mediation services for private debtors and their creditors alike.

Research limitations/implications

Data collected for the purpose of this study may not be comprehensive because given the sensitivity of the area of study that is misconduct – including breaking the law – not all machinations may have been revealed and described in this work. Therefore, further research needs to be conducted in this field.

Practical implications

The paper has implications for policymakers. Consumer bankruptcy system is relatively new and needs to be amended to allow debtors and creditors to negotiate write-offs not by sending countless letters through their respective representatives, which is also carried out over a long period of time, but to try to come to terms in one agency, which is responsible for both sides.

Social implications

The findings in this paper may provide some valuable insights, which could also give impulses to debates on problems that may come with immigration.

Originality/value

To the best of the author’s knowledge, no research exists that analyzes the topic at hand with such extensive data and using both methods of research at the same time.

Details

Journal of Financial Regulation and Compliance, vol. 28 no. 2
Type: Research Article
ISSN: 1358-1988

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