Work detail

Determinants of Claims Satisfaction in Insolvency Proceedings in the Czech Republic

Author: Mgr. Petr Pařízek
Year: 2017 - winter
Leaders: PhDr. Ing. Jiří Skuhrovec PhD.
Consultants:
Work type: Finance, Financial Markets and Banking
Masters
Language: English
Pages: 86
Awards and prizes: B.A. with distinction from the Director of IES FSV UK for an extraordinarily good bachelors diploma thesis.
Link: https://is.cuni.cz/webapps/zzp/detail/185564/
Abstract: This paper examines determinants of creditors’ claims satisfaction in insolvency
proceedings in the Czech Republic. To our knowledge, it is the first research
to such extent in the Czech Republic covering this field. Combining microdata
from Insolvency Register, Business Register, Ministry of Finance and other
sources, we construct a unique dataset of more than 2,600 cases. We identify
several basic determinants of satisfaction: a higher share of secured claims, real
estate and cash in assets of a company, submission of financial statements into
Business Register, selling the business as a whole within the proceedings, and
entrepreneur cases. We find no such effect for the audit of financial statements
or for the age of a company. Moreover, we search for other indicators that
may result in the lower satisfaction of claims, out of which five are statistically
significant: a homeless person in statutory body, registered office at a firm nest,
being listed as unreliable VAT payer, a connection to persons that have multiple
records in Insolvency Register and a substantial increase in depreciation in the
period between the last two submitted financial statements. In contradiction
to the bankruptcy prediction literature, we show that the financial data are
unreliable for predicting the outcome of insolvency proceedings. Our findings
bring a practical contribution for creditors in credit risk management as well
as for the state.

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