Antonia Madrid-Guijarro

The aim of this work is to analyze the factors that help companies avoid liquidation following the spirit of the Spanish insolvency law. This work focuses on the phase starting when companies file for bankruptcy and ending with the completion of the common phase. We apply the agency theory to explain how insolvency administrators and court characteristics influence the outcome of the bankruptcy process (liquidation or reorganization). We analyze unique accounting data from 2,627 companies that filed for bankruptcy during the period 2008–2014. The findings reveal the significant roles played by the liquidation trustee, Big 4 administrators, and higher remunerations, along with the type of court in charge. Processes are more likely to result in reorganization if they are handled by specialized courts, managed by the Big 4, and if the insolvency administrator has longer experience in bankruptcy filing and receives a higher remuneration. These findings have important implications for all the agents involved. It is necessary to rationalize the filing process, foment better training for insolvency administrators, provide courts with more funds, and create more specialized courts. The principal contribution of this article is to examine the role played by insolvency administrators and the courts, and their influence on the outcome of the insolvency process. JEL CLASSIFICATION C35; D21; D22; G33; G38