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Can bankruptcy codes create value? Evidence from creditors’ recoveries in France, Germany, and the UK Régis Blazy, Joël Petey and Laurent Weill Discussant:

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1 Can bankruptcy codes create value? Evidence from creditors’ recoveries in France, Germany, and the UK Régis Blazy, Joël Petey and Laurent Weill Discussant: João Teixeira University of the Azores Portugal EFMA 2010, Aarhus 24 June 2010

2 Contribution Important research question: does the bankruptcy procedure matters in the value creation process under bankruptcy? “Unique” sample of 900 corporate bankruptcy files. Analysis is conducted for various classes of claimants (senior claims, junior claims and new money). 2

3 Comparison of data and results Result of Davydenko and Franks (2008): “recovery rates for banks are significantly lower in France than those in Germany and in the UK”. In your study results differ. What is the proportion of banks in your sample of creditors? How different is it from Davydenko and Franks (2008) that could lead this study to other conclusions? Is the data really comparable? The liquidation in the UK relies on the willingness of the sole appointer. Have not controlled for that. Why not study an industry effect? 3

4 Structure of claims In overall, France and Germany have similar recovery rates (20,67% and 21,26%, respectively) and both have higher rates than the UK (13,82%). Why do you conclude that the structure of claims, with France having more senior debt than both Germany and the UK, may explain a higher recovery rate in France when compared to the UK? If France has higher senior debt proportion than Germany, shouldn't we also expect higher recoveries rates in France when compared to Germany? 4

5 Quality of the assets The study measures the quality of the assets using a coverage ratio Is this a robust measure? What about the % of fixed assets? Is that possible to distinguish between tangible and intangible assets? France has higher coverage ratio than Germany and the UK. The study concludes that this result may explain higher recovery rates in France when compared to UK. But once again, why this intuition does not leads to the same conclusion when comparing France with Germany? Correlation between coverage ratio and recovery rate? 5


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