Is Insolvency Stigmatised? An Investigation into the Failure of the Rescue
Location:
Teaching Room 2,
Old College
Date/time
Thu 14 March 2024
16:00-17:00
About the event
Does insolvency attract stigma? And if so, to what degree? Answering these questions is central to understanding company, or director, responses to corporate insolvency, particularly in the early stages of distress, where ailing becomes failing. A large body of literature argues that there exists a strong sense of stigma surrounding insolvency that contributes to the low uptake of rescue procedures. The prevailing explanation is that “the stigma surrounding going out of business […] prevents many from looking for help at the time it would provide the greatest chance of turning a business around.” However, stigma is notoriously difficult to qualify or quantify. The literature, so far, has mostly relied on the assumption that “bankruptcy stigma is ubiquitous” and therefore, “[its] determinative role […] should not be questioned.” So, how important is the stigma around insolvency?
To answer this question, the paper combines two qualitative studies based on different methodologies. The first study is an extensive review of the literature in selected jurisdictions; the second is an empirical collection of qualitative data obtained through interviews with corporate directors.
The findings can be briefly summarised as follows:
1. A prominent literary narrative around the stigma associated with insolvency is identified. In the majority of jurisdictions surveyed, this narrative is apparent across policy debate, legislative discussion and academic literature.
2. However, it is found that in the corporate reality, amongst company directors, the sense of stigma around insolvency is not as strong as the literary narrative may suggest. Rather, the empirical study reveals that, amongst directors of micro, small and medium enterprises (MSMEs), the perception of stigma associated with insolvency is no more than moderate. Most importantly, an acute lack of knowledge of insolvency amongst corporate managers is identified.
Speaker, Dr Emilie Ghio - Lecturer in Corporate and Insolvency Law
This event is in person only.