Explaining the choice between alternative insolvency regimes for troubled companies in the UK and Sweden

Over the past 20 years UK and Swedish insolvency law has moved in the direction of company rescue rather than enforcing secured creditor priority. However, both countries show a low take up rate of rescue procedures. This paper uses a cost-benefit approach to examine the choices faced by key stakeho...

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Bibliographic Details
Published in:European journal of law and economics 2006-07, Vol.22 (1), p.21-47
Main Authors: Pond, Keith, Cook, Gary
Format: Article
Language:English
Subjects:
Bankruptcy
Bankruptcy laws
Bargaining
Cost benefit analysis
Cost-benefit
Costs
Creditor
Creditors
Debt
Enterprises
Influence
Insolvency
Law
Moratoriums
Reform
Rescue
Studies
Supervision
Sweden
United Kingdom
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Summary:Over the past 20 years UK and Swedish insolvency law has moved in the direction of company rescue rather than enforcing secured creditor priority. However, both countries show a low take up rate of rescue procedures. This paper uses a cost-benefit approach to examine the choices faced by key stakeholders using the now conventional transaction cost paradigm. The paper argues that it is predominantly the ex post indirect and time costs which explain the poor take up of customised rescue procedures. In both countries the ex ante cost of delay in filing also presents a tough challenge not fully addressed by policymakers. [PUBLICATION ABSTRACT]
ISSN:0929-1261
1572-9990
1572-9346
DOI:10.1007/s10657-006-8979-1