Resolution of Financial Distress : An

This book focuses on the principles of and practical approaches to addressing the public policy trade-off involved in systemic corporate and financial sector crises and the lessons learned from the changes taking place in bankruptcy frameworks around the world. It includes research on recent public policy initiatives for distress resolution or market-based restructuring.

Foreword

vii

Contributors

ix

Resolution of Financial Distress: An Overview

xv

Stijn Claessens

Simeon Djankov

Ashoka Mody

Insolvency Regimes: Current Interest and Principles

xvii

Systemic Distress and Corporate Restructuring

xxii

Conclusions

xxx

References

xxxi

Bankruptcy Laws: Basic Economic Principles

1

(24)

Joseph E. Stiglitz

Key Principles

2

(5)

Efficiency and Incentive Issues

7

(6)

Seller Beware

13

(1)

Implications for Policy

13

(3)

The Theory of Systemic Bankruptcy

16

(5)

Conclusion

21

(1)

References

22

(3)

Bankruptcy Procedures in Countries Undergoing Financial Crises

25

(22)

Michelle J. White

Economic Issues in Corporate Bankruptcy

25

(14)

Bankruptcy and Entrepreneurial Activity

39

(4)

Conclusion

43

(1)

References

43

(4)

Systemic Corporate Distress: A Legal Perspective

47

(18)

Jay Lawrence Westbrook

The Reform Movement

48

(2)

Elements of Reform

50

(8)

Special Rules for Systemic Distress

58

(2)

Cross-Desciplinary Research

60

(3)

References

63

(2)

Creditor Protection and Bankruptcy Law Reform

65

(26)

Rafael La Porta

Florencio Lopez-de-Silanes

Content of Bankruptcy Laws around the World

66

(6)

Enforcement of Laws around the World

72

(4)

Consequences of Creditor Protection in Financial Markets

76

(2)

Real Consequences of Creditor Protection

78

(2)

Reforming Bankruptcy Procedures

80

(5)

Conclusion

85

(1)

Appendix 4A. Definitions of Variables

86

(2)

References

88

(3)

Corporate Debt Restructuring: Auctions Speak Louder Than Words

91

(16)

Donald B. Hausch

S. Ramachandran

Market-Based Bankruptcy

94

(1)

The Proposed ACCORD

95

(2)

Implementing ACCORD

97

(5)

Additional Considerations

102

(3)

Conclusion

105

(1)

References

105

(2)

Alphatec Electronics PCL

107

(42)

Perry Fagan

C. Fritz Foley

Stuart Gilson

History of Alphatec Electronics and the Alphatec Group

109

(4)

Alphatec in Distress

113

(15)

The First Restructuring Plan

128

(6)

The New Thai Bankruptcy Law

134

(2)

The Rehabilitation Plan

136

(9)

Postscript

145

(4)

Corporate Debt Restructuring in a Systemic Financial Crisis: Mexico's Experience, 1996-98

149

(18)

Alberto Mulas

Fondo Bancario de Protecction al Ahorro

Corporate Debt Restructuring, 1995-97

151

(9)

FOBAPROA's Role as a Restructuring Agent through its Corporate Asset Recovery Unit

160

(4)

Key Lessons from Mexico's 1996-98 Restructuring Experience

164

(3)

Reconstruction Finance Corporation Assistance to Financial Intermediaries and Commercial and Industrial Enterprises in the United States, 1932-37

167

(38)

Joseph R. Mason

RFC Background: Politics, Funding, and Operations

168

(4)

RFC Assistance to Financial Institutions and Commercial and Industrial Enterprises

172

(29)

Summary and Conclusions

201

(1)

References

202

(3)

Japan Confronts Corporate Restructuring

205

(24)

Arthur J. Alexander

The Case for Restructuring

206

(5)

Managing Financial Distress

211

(90)

Conclusions

301

References

227

(2)

Financial Restructuring in East Asia: Halfway There?

229

(32)

Stijn Claessens

Simeon Djankov

Daniela Klingebiel

Was the East Asian Crisis Unique?

229

(1)

East Asian Crisis: Similar Origins to Previous Crises, but Difference in Scale

230

(1)

Steep Decline and Rapid Recovery

230

(13)

Corporate Restructuring Is Gathering Speed

243

(8)

The Risk of an Unsustainable Recovery

251

(7)

References

258

(3)

The Politics of Corporate and Financial Restructuring: A Comparison of Korea, Thailand, and Indonesia

261

(44)

Stephan Haggard

Financial and Corporate Restructuring: Political Issues and Empirical Patterns

263

(5)

Financial and Corporate Restructuring: Political Determinants

268

(3)

Korea

271

(11)

Thailand

282

(10)

Indonesia

292

(9)

Conclusion

301

(1)

References

302

(3)

The Role of Cross-Border Mergers and Acquisitions in Asian Restructuring

305

(36)

Ashoka Mody

Shoko Negishi

Cross-Border M&A: Trends, Motives, and Impacts

306

(8)

East Asian Financial Distress and Rcovery

314

(7)

Cross-Border M&As in East Asian Restructuring

321

(10)

Policy Implications

331

(4)

Conclusion

335

(2)

References

337

(4)

Asset Management Companies

341

(40)

Daniela Klingebiel

The Centralized Versus the Decentralized Approach

342

(4)

The Different Types of Asset Management Companies

346

(3)

Evidence

349

(6)

Lessons from Cross-Country Experience

355

(6)

Appendix 13.A. Main Characteristics of Asset Management Companies

361

(11)

Bibliography and Reference List

372

(9)

Index

381

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Resolution of Financial Distress : An International Perspective on the Design of Bankruptcy Laws

Summary

Table of Contents

Supplemental Materials