Article

 

The economics of bankruptcy and the transition to a market economy 
 
by
 
Istvan Abel, Budapest University of Economics and CEPR
Konstantine Gatsios, Athens University of Economics and Business and CEPR
 
JEL classification : G330, P510
 
Abstract
The paper deals with simple decision rules in bankruptcy procedures. It describes special issues of enterprise liquidation and reorganization during economic transformation in Eastern European countries. In these countries, the consequences of stringent bankruptcy regulations, exercised within a weak market environment characterized by underdeveloped capital markets, may force firms into liquidation even though reorganization may be a more efficient option both for them and for the economy as a whole.