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Can Bankruptcy Codes Create Value? Evidence from Creditors’ Recoveries in France, Germany, and the United Kingdom

This paper provides evidence on the value creation of bankruptcy procedures that belong to different legal systems (French civil law, German civil law, and British common law). Using a sample of 900 hand-collected corporate bankruptcy files, we find that France and Germany show quite similar overall recovery rates that are greater than in the United Kingdom. However, when controlling for the quality of assets and for the structure of claims, we observe that recovery rates are not significantly different between France and the United Kingdom, while they remain greater in Germany. We show that there are significant differences in terms of recoveries between procedures within countries. Finally, we observe that the recovery rates of the different classes of claimants also significantly differ across countries and procedures. These results show that bankruptcy codes are not equivalent in the way they manage and realize the debtor’s assets and protect the various claimants.