Title: Possible causes of delay in default in the Czech Republic

Authors: Tatiana Škerlíková; Lucie Rudolfová

Addresses: Department of Corporate Finance – KFOP, University of Economics, Prague, W. Churchill Sq. 4, 130 67 Prague 3, Czech Republic ' Department of Corporate Finance – KFOP, University of Economics, Prague, W. Churchill Sq. 4, 130 67 Prague 3, Czech Republic

Abstract: This paper analyses the causes of the delay in commencement of insolvency proceeding. We tested two possible causes. First one is inappropriate reaction of the financially distressed entity to the worsening financial situation. As a second cause of the delay we consider unsuccessful filing due to incorrectly prepared insolvency petitions. In our sample, companies postpone commencement of insolvency proceedings measured by bankruptcy models at least by two years. Moreover, it seems that even the companies, which normally disclose financial statements (this is obligatory for all companies in the Czech Republic) suspend disclosing as their financial situation deteriorated. The petitions were dismissed by the court 15 times in our sample of 50 companies. We consider the most of them as almost sufficient to declare default.

Keywords: insolvency law; default; financial distress; unsuccessful filing; proceedings commencement; financial disclosure; petition dismissal; petition withdrawal; insolvency declaration; Czech Republic; insolvency proceedings; proceedings postponement; bankruptcy models.

DOI: 10.1504/IJEPEE.2015.073504

International Journal of Economic Policy in Emerging Economies, 2015 Vol.8 No.4, pp.305 - 317

Available online: 10 Dec 2015 *

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