These economies differ in their institutional frameworks for resolving financial distress, partly because of the different origins of their judicial systems. One difference is the strength of creditor rights, which Claessens, Djankov, and Klapper document. They expect that differences in legal enforcement and judicial efficiency should affect the resolution of financial distress. Using a sample of 4,569 publicly traded East Asian firms, they observe a total of 106 bankruptcies in 1997 and 1998. Filings are more likely in countries with better judicial systems.
Filings are more likely where there are both strong creditor rights and a good judicial system.
These results alone do not allow Claessens, Djankov, and Klapper to address whether increased use of bankruptcy is an efficient resolution mechanism. The full report is available in PDF format.