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Bankruptcy Resolution in Japan: Corporate Reorganization vs. Civil Rehabilitation

by Pen Xu of Hosei University & RIETI

February 2004

Abstract: I present evidence on recent bankruptcy resolution and bankruptcy reform in Japan. Prior to bankruptcy, bank lenders are less likely to intervene than they did before. Most bankrupt firms experience abnormal president turnover around bankruptcy filing, regardless types of filings. Priority of claims is less violated in bankruptcy resolution in Japan than in the United States. A Civil Rehabilitation firm spends in bankruptcy substantially shorter than a Corporate Reorganization firm. Also, a Corporate Reorganization firms emerges quicker after the 2000 bankruptcy reform. The main difference between Rehabilitation duration and Reorganization duration is that leverage prolongs Civil Rehabilitation duration only.

JEL Classification: G33.

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