Date Added: Mar 2010
Spain has the world's lowest business bankruptcy rate (number of formal business bankruptcies divided by number of firms). The authors document this fact, analyze the Spanish institutional framework and compare it with those of other European countries. They argue that a way to organize the documented evidence is to keep into account both the ex-post and the ex-ante efficiency repercussions of the Spanish institutional framework. They propose a view that is based on the idea that the unattractiveness of bankruptcy procedures and the efficiency of mortgage collateral lead Spanish firms to reduce the risk of bankruptcy. They show that this view is compatible with stylized features of firms' capital structures, asset structures, and profitability.