Good, fast or cheap - pick one: bankruptcy design and frictions in Brazil

• Grant number: 19/20823-8
• Support Opportunities: Scholarships in Brazil - Master
• Start date: March 01, 2020
• End date: March 31, 2021
• Field of knowledge: Applied Social Sciences - Economics
• Principal Investigator: Rafael de Vasconcelos Xavier Ferreira
• Grantee: José Matheus Gomes Pessôa Andrade
• Host Institution: Faculdade de Economia, Administração e Contabilidade (FEA). Universidade de São Paulo (USP). São Paulo , SP, Brazil

Abstract

Optimal bankruptcy design deals with the following trilemma: deciding correctly when to liquidate firms, making that decision quickly without gathering creditor´s information, or minimizing bankruptcy costs (Kordana and Posner, 1999). Stated otherwise, one must choose between a good, a fast or a cheap bankruptcy procedure. Choosing side in this trilemma was especially difficult due to institutional restrictions in Brazil (Araujo and Funchal, 2005). Nevertheless, the 2005 Brazilian Bankruptcy reform had positive effects on credit supply (Araujo et al., 2012) and firm's investment (Ponticelli e Alencar, 2016). However, delays (Sacramone et al., 2017) and low recovery rates (Jupetipe et al., 2017) marks the current proceedings. Given this demotivating scenario, there is an ongoing reform discussion in Brazil. It is aimed to, among other points, stimulate Debtor-in-possession (DIP) financing and giving fiscal claims a higher priority in reorganization processes. Our goal is to contribute to this discussion by estimating Dou et al. (2019) structural model for bankruptcy frictions for Brazil using data already partially tabulated. In particular, we will assess the proposed reforms effects excess liquidation/reorganization, timing of agreements and recovery rates. Consequently, our project also contributes to the literature of optimal bankruptcy design and estimation of non cooperative games. (AU)

Academic Publications

(References retrieved automatically from State of São Paulo Research Institutions)

ANDRADE, José Matheus Gomes Pessôa. Bankruptcy design and frictions in Brazil. 2022. Master's Dissertation - Universidade de São Paulo (USP). Faculdade de Economia, Administração e Contabilidade (FEA/SBD) São Paulo.