Debt Enforcement Around the World
We present insolvency practitioners from 88 countries with an identical case of a hotel about to default on its debt, and ask them to describe in detail how debt enforcement against this hotel will proceed in their countries. We use the data on time, cost, and the likely disposition of the assets (preservation as a going concern versus piecemeal sale) to construct a measure of the efficiency of debt enforcement in each country. We identify several characteristics of debt enforcement procedures, such as the structure of appeals and availability of floating charge finance, that influence efficiency. Our measure of efficiency of debt enforcement is strongly correlated with per capita income and legal origin and predicts debt market development across countries. Interestingly, it is also highly correlated with measures of the quality of contract enforcement and public regulation obtained in other studies.
The authors are from the World Bank, Harvard University, the World Bank, and Harvard University, respectively. They thank Osborne Jackson, Julien Levis, Tatiana Nenova and Justin Yap for assistance with this project, Douglas Baird, Julian Franks, Nicola Gennaioli, Rafael La Porta, Giacomo Ponzetto, Stefano Rossi, David Scharfstein, and Ivo Welch for helpful comments, and the World Bank for financial support. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.
Simeon Djankov & Oliver Hart & Caralee McLiesh & Andrei Shleifer, 2008. "Debt Enforcement around the World," Journal of Political Economy, University of Chicago Press, vol. 116(6), pages 1105-1149, December. citation courtesy of