Small Business Economics

, 31:409 | Cite as

Legal reform and aggregate small and micro business bankruptcy rates: evidence from the 1997 Belgian bankruptcy code

  • Nico Dewaelheyns
  • Cynthia Van Hulle


Many Continental European countries recently reformed their bankruptcy legislations to stimulate reorganization and firm survival. We show that the Belgian 1997 bankruptcy code reform, which implemented several international best practice recommendations, significantly reduced aggregate small and micro business bankruptcy rates. However, using distributed lag models to control for the relationship between bankruptcy rates and macroeconomic variables such as real GDP growth, consumer confidence, inflation, etc., we find that the new code’s impact is not the same for all types of companies. Specifically, while the beneficial effect of the reform is largely similar between small firms (i.e. stock corporations) and micro firms (i.e. partnerships), it is only significant in certain industries (manufacturing and trade). Overall, our results indicate that especially the measures taken to limit domino bankruptcy effects are likely to have had a substantial impact. Our findings have several policy implications for the evaluation and modification of the bankruptcy system.


Bankruptcy reform Aggregate bankruptcy rates 

JEL Classifications

G33 E32 K22 L26 



We would like to thank the National Bank of Belgium for database access and Dirk Heremans, Frederiek Schoubben, Linda Van de Gucht, Marc Deloof, Marco Becht, two anonymous reviewers and the editor (Marco Vivarelli) for useful comments and suggestions.


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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Faculty of Economics and Applied Economics, Department of Accountancy, Finance and Insurance (AFI), Research Center FinanceK.U.LeuvenLeuvenBelgium
  2. 2.Department of Business StudiesLessius University CollegeAntwerpenBelgium

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