Transactions with creditors - Ownership regimes and creditor protection

3 important questions on Transactions with creditors - Ownership regimes and creditor protection

How are the variations in framework characterised?

Debtor-friendly/ Creditor-friendly
- According to the extent to which they facilitate or restrict creditor enforcement against a financially distressed debtor
- Concentrated debt claims lower creditor coordination costs
- Banks influence politics. Interest groups vary with the nature of the financial system

Who contracts with creditors out of the jurisdictions?

Germany and Italy: creditor-oriented accounting principles and legal capital rules
- Debt finance: from banks (concentrated debt)


US: market-oriented disclosure requirements and no capital constraints
- Banking concentrations is restricted and share ownership is dispersed

What is the role of bankruptcy laws in different jurisdictions?

UK, Germany, Italy, Japan:
- Greater bank power, no judicial involvement
- Tough bankruptcy proceedings
- Compliance ex ante from recalcitrant debtors
- Creditors unwilling to negotiate ex post

France: state involvement, bankruptcy proceedings more frequent.

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