International Review of Law & Economics 70 (2022) 106063

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International Review of Law & Economics

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Resolution of corporate insolvency during COVID-19 pandemic. Evidence

from France ]]
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⁎
Nicolae Stef a, , Jean-Joachim Bissieux b
a
CEREN EA 7477, Burgundy School of Business, Université Bourgogne Franche-Comté, Department of Accounting, Finance & Law, Dijon, France
b
Maître Jean-Joachim BISSIEUX Mandataire Judiciaire, 2B avenue de Marbotte Immeuble "Marbotte Plaza", BP 57970, 21079 Dijon, France

a r t i cl e i nfo a bstr ac t

Article history: We investigate how the lockdown enforcement by French authorities is associated with the resolution of
Received 3 September 2021 corporate insolvency. In this sense, we make a distinction between four legal procedures, namely the
Received in revised form 30 January 2022 amicable liquidation (out-of-court exit), the judicial liquidation (court-driven exit), the restructuring pro­
Accepted 1 March 2022
cedure available to non-defaulted firms, and the restructuring procedure available to defaulted firms. Using
Available online 3 March 2022
a sample of 3488 non-listed and non-financial French firms, our estimates yield three major findings. First,
the likelihood of judicial liquidation increased after the lifting of the quarantines compared to the pre-
JEL Classification:
G33 H12 pandemic period. Second, the non-defaulted firms had a higher likelihood to reorganize in court during the
second lockdown. Third, the lifting of the first lockdown led to a decrease in the probability of restructuring
Keywords: the assets of defaulted firms. Although the main objective of the lockdown was to limit spread of the virus,
Covid-19 its enforcement has not encouraged the use of the out-of-court exit path.
Lockdown © 2022 The Author(s). Published by Elsevier Inc.
Bankruptcy CC_BY_4.0
Reorganization
Liquidation
Firm

1. Introduction Surprisingly, bankruptcies appeared to slow down in some

High levels of COVID-19 infection obliged local authorities across
the world to impose social distancing and quarantine measures. As
firms were temporarily confronted with low or nonexistent demand,
the risk of mass bankruptcies overshadowed entire economies.
Demmou et al.’s (2021) analysis on OECD (Organisation for
Economic Co-operation and Development) countries indicated a
decline in firms’ profits ranging from 40% to 50% as a result of the
COVID-19 shock. Most notably, it was predicted that an expected
percentage of 7–9% of viable firms would be subject to financial
distress with a negative book value on equity, whereas around one-
third of firms would be unable to cover interest expenses (Demmou
et al., 2021). In the context of a not only a 15% drop in the volume of
goods and services traded but also an estimated decrease of 3.3% of
the global gross domestic product, the insurance company Euler
Hermes predicted a strong global wave of bankruptcies due to the
pandemic in May 2020 with an expected rise of bankruptcies by 25%
in United States and 19% in Europe.
⁎
Corresponding author.
E-mail addresses: nicolae.stef@bsb-education.com (N. Stef),
jeanjoachim.bissieux@etudebissieux.com (J.-J. Bissieux).
countries during the lockdown period. According to the United
Kingdom’s (UK) Insolvency Service, the daily number of compulsory
liquidations decreased by 80% in May 2020 compared with the
prelockdown period of March 2020. Additionally, 944 cases of cor­
porate insolvencies were reported in May 2020 in England and
Wales, which was 30% less than those in the same month of the
previous year. The American Bankruptcy Institute also confirms an
average decrease of 25.1% in business filings for the period from
April 2020 to June 2020 compared with those during the same
period in 2019. The first lockdown was enforced in France from
March 17, 2020, to May 10, 2020, during which French business in­
solvencies decreased by 63% in April 2020 compared with those in
February 2020, while the average decrease over the year was 19.1%
for April 2020 (Banque de France). How were such reductions pos­
sible? Following the explanations of the UK’s Insolvency Service,
bankruptcy institutions were forced to reduce capacity to establish
new work conditions to safeguard their employees’ health.
Moreover, documents provided by British insolvency practitioners
suffered from long delays. Federal courts in the United States and
French commercial courts were temporarily closed to the general
public, and their activities were managed through online services.
On a different note, Castelliano et al. (2021) emphasized that the

https://doi.org/10.1016/j.irle.2022.106063
0144-8188/© 2022 The Author(s). Published by Elsevier Inc.
CC_BY_4.0
N. Stef and J.-J. Bissieux
pandemic also affected the labor courts leading to a considerable
decrease in the clearance rate and an increase in court backlogs.
Despite these impediments, some firms still managed to leave the
market during the lockdown and post-lockdown periods, as the
accumulation of debt and decreases in liquidity led to a rise in im­
mediate liabilities and decrease in available assets, raising the pay­
ment default risk.
Some studies have also raised the potential issue of increased
bankruptcies that could be caused by the health crisis (Carletti et al.,
2020; Demary, 2021; Didier et al., 2021; Liu et al., 2021). Battiston
et al. (2007) asserted that a bankruptcy boom is favored by long
delayed payments (trade credits) and additional costs generated by
failures in supply. Similarly, Jacobson and Von Schedvin (2015) ar­
gued that trade debtor failures increase the bankruptcy risk of trade
creditors, leading to an avalanche of corporate failures. Such ele­
ments can be found in the context of COVID-19. Hence, effectively
addressing corporate insolvency during the pandemic periods is a
question of considerable importance in bankruptcy literature. Our
study aims to answer that question by shedding light on how lock­
down measures correlate with firms’ institutional path to the re­
solution of insolvency. In this sense, we investigate the French
insolvency framework that provides multiple legal procedures, such
as amicable liquidation (out-of-court exit); judicial liquidation
(court-driven exit), a reorganization procedure for non-defaulted
firms (sauvegarde); and a restructuring procedure for firms in pay­
ment default (redressement judiciaire). Using a sample of 3488
nonfinancial firms, we examine the consequences of the two quar­
antines enforced by French public authorities in 2020 on the firms’
likelihood to engage in one of these institutional paths.
Corporate failure is driven by various factors ranging from fi­
nancial features (Lennox, 1999) to subcontracting relationships (Doi,
1999), business maturity (Pérez et al., 2004), macroeconomic in­
stability (Bhattacharjee et al., 2009), debt cost (Bottazzi et al., 2011),
founders’ experience (DeTienne and Cardon, 2012), directors’ in­
dependence (Hsu and Wu, 2014), firm-specific uncertainty (Byrne
et al., 2016), new firm formation (Stef and Jabeur, 2018; Jabeur et al.,
2021), difficulty of firing (Stef, 2018), legal form (Iwasaki and Kim,
2020), legal reform (Bose et al., 2021), and institutional quality (Stef,
2021). A detailed typology of the causes of bankruptcy was initially
developed by Blazy et al. (2013), proposing seven types of default
causes, including strategy, production, finance, management, out­
lets, accident, and external environment. Their analysis demon­
strated that the major causes of corporate bankruptcy in France and
the UK are primarily poor quality products, high price strategy, and/
or disappearance of customers (outlets). In the case of legal re­
structuring, external environment appeared to be the second most
frequent cause of firms defaulting. Similarly, Blazy and Stef (2020)
reported the impact of external environment as one of the principal
causes of bankruptcy in Hungary, Poland, and Romania. In their in­
vestigation, causes related to the external environment included
exchange rate fluctuations, increase in competition, or credit crunch
periods, as well as events of force majeure (e.g., war, political crisis, or
natural catastrophe). A new component of firms’ external environ­
ment is the global spread of COVID-19. In this framework, our study
will address the relevance of public health lockdown measures as
determinants of firms’ failure for the first time.
We organized the remainder of our study into the following four
sections. Section 2 provides an overview of France-specific institu­
tional paths to insolvency resolution (subsection 2.1), presents the
specificities of the French lockdown, discusses the incentives for
firms to leave the market during the pandemic crisis (subsection
2.2), and examines the attractiveness of these paths for (non)de­
faulted firms confronted with the COVID-19 pandemic (subsection
2.3). Data and the empirical analysis are presented in Sections 3 and
4, respectively. The final section highlights and discusses the major
results of our study.
2
International Review of Law & Economics 70 (2022) 106063
2. Resolution of corporate insolvency and the pandemic crisis
2.1. Insolvency framework of France
French bankruptcy code includes an array of procedures aimed at
addressing corporate financial failure.1 The use of an insolvency
proceeding depends on the capacity of the debtor (firm) to honor its
financial obligations. A firm that is unable to meet its commitments
within a period of 45 days is considered to be in suspension of
payment. Consequently, the debtor can settle the creditors’ claims
through one of the two procedures, namely, judicial liquidation or
the redressement judiciaire (judicial restructuring) procedure. The
path of judicial liquidation is pronounced by the Commercial Court
or Judicial Court, depending on the location of business activity.
Initiating this procedure requires not only the firm’s payment de­
fault but also the impossibility to restore the financial health of the
business through a restructuring procedure. A bankruptcy practi­
tioner is appointed by the competent court to terminate the firm’s
activity by selling its assets to settle the creditors’ claims. The closing
of judicial liquidation is pronounced by the court when liabilities are
no longer due, the creditors’ claims are fully satisfied, or the con­
tinuation of the procedure is prevented by a lack of assets.
Conversely, the redressement judiciaire procedure is a re­
structuring tool, including three main objectives, which are the
debtors’ survival, preservation of employment, and creditors’ re­
imbursement. When the procedure is triggered, the debtor is subject
to an observation period, which cannot exceed 18 months, during
which the debtor and administrator appointed by the court must
identify solutions for achieving the three main objectives. According
to Blazy et al. (2013), the observation period grants a stay of claims,
during which managers can maintain their positions with the help of
the administrator. If the firm’s restructuring is doomed to fail, the
court can convert the redressement judiciaire procedure into a judi­
cial liquidation.
The French bankruptcy code also provides procedures to firms
that are not confronted with a default of payment. In this sense,
some bankruptcy codes can rely upon different liquidation proce­
dures. For instance, the insolvency code of the UK provides three
types of procedures, including compulsory liquidation, the creditors’
voluntary liquidation, and members’ voluntary liquidation (Blazy
et al., 2013). The first two procedures can be enforced when a debtor
is unable to fully repay debts, while the last procedure can be trig­
gered when shareholders holding sufficient assets are willing to
dissolve their own firms to cover the creditors’ claims. Similarly, the
French bankruptcy system relies on a liquidation procedure known
as amicable liquidation. The procedure results from a voluntary
decision made by the owners (shareholders), who must vote for the
early dissolution of the company at an extraordinary general
meeting. It can be triggered as long as the interests of a firm’s
creditors are not harmed. Therefore, the assets’ values must cover
the liabilities so that creditors are fully reimbursed at the end of the
procedure. After establishing an inventory, the liquidator, who is
appointed by the owners, proceeds to sell the assets and then dis­
charge the debts. The primary objective is not to pay off creditors but
to put an end to a firm’s operations by releasing its residual assets.
This procedure can be a tool for restructuring companies, as the
remaining assets can be reinvested, reallocated to new activities, or
redistributed to the partners; however, if the proceeds from selling a
firm’s assets are not sufficient to cover the liabilities and creditors
are unwilling to accept a lower reimbursement, a firm must follow
the path of a court-driven exit (Ponikvar et al., 2018).
1
The legal framework of bankruptcy procedures is covered by book No. 6 of the
French commercial code.
N. Stef and J.-J. Bissieux
Fig. 1. Institutional paths to resolution of inslovency.
Nevertheless, firms that are not subject to payment suspension
but to financial difficulties can initiate a restructuring procedure
known as sauvegarde procedure.2 As in the case of redressement ju­
diciaire, the procedure aims to restore the firm’s financial health and
preserve employment; however, the maximum length of the ob­
servation period is 12 months and the manager that retains their
position must propose a restructuring plan. The financial measures
included in the plan must be accepted by the creditors through
voting. If the firm’s cessation of payment occurs during the execu­
tion of the plan, the court can convert the sauvegarde procedure into
either a judicial liquidation or redressement judiciaire procedure.
Fig. 1 presents an overview of a firm’s institutional path to in­
solvency resolution.
2.2. Failure risk and the COVID-19 pandemic
2.2.1. Specificities of the French lockdown
Following the rise of COVID-19 infections at the beginning of
2020, the French government enforced its first lockdown on March
17, 2020, which lasted until May 5, 2020. Unfortunately, lifting the
first lockdown did not inhibit the spread of the virus, leading to a
second lockdown from October 30, 2020, to December 14, 2020.
Those two lockdowns imposed two major restrictions. First, in­
dividuals were obliged to follow social distancing rules that limited
movement outside of their homes. Exceptions to these rules were
applied for those seeking to go to work, to a medical appointment, to
purchase goods of basic necessity, to walk near their homes for an
hour, or to attend a judicial summon. Second, businesses that were
not essential to the functioning of the national economy were forced
to temporarily close. The only entities that remained opened were
food shops, essential public institutions, banks, pharmacies, and gas
stations.
These restrictions placed strong pressure on firms’ capacity to
remunerate employees and to honor fiscal obligations.
Consequently, the French government decided to provide some
public support to the private sector.3 First, firms subject to financial
difficulties had the option to defer the payment of social contribu­
tions and direct taxes. Second, a public program of state guaranteed
loans, aimed to strengthen the liquidity of firms, was launched at the
beginning of the first lockdown. This device allowed all firms, except
for real estate and financial firms, to benefit from a state-guaranteed
loan amounting to 3 months of 2019 turnover, or two years of payroll
for innovative or young firms. These loans did not require a re­
imbursement in the first year. Third, firms confronted with a re­
duction in activity could apply for a program addressing long-term
partial activity that granted an allowance to employees for their
nonworking hours.
In the context of the pandemic, a short-term bankruptcy reform
was also adopted by the French authorities, which impacted owners’
2
The French law also proposes two procedures to negotiate the debt in a con­
fidential and amicable manner under the guidance of a trustee appointed by the
Commercial Court, i.e., the conciliation procedure and mandat ad hoc procedure.
3
We identified these public measures from press releases provided by the French
Ministry of Finance Economics and Revival.
3
International Review of Law & Economics 70 (2022) 106063
incentives to file for a liquidation procedure. According to the French
commercial code, a cessation of payments must be declared to the
court within a period of 45 days that will decide the settlement
procedure of a firm’s debt. In the context of COVID-19, a new order
was enacted by the French government that (1) granted the right to
file for bankruptcy only to debtors, (2) permitted an assessment of
the cessation based on firm’s financial health as reported on March
12, 2020—just four days before the first lockdown start date, and (3)
encouraged the use of preventive bankruptcy procedures by firms
facing payment cessation after March 12.4 Hence, the new govern­
mental order provided debtors the opportunity to decide when to
exit during the periods of lockdown and post-lockdown. In this new
context, firms that engaged in judicial liquidation procedures were
probably businesses with extremely low chances of financial re­
covery; however, it can also be speculated that lockdown established
a context that encouraged debt renegotiation, leading to the out-of-
court exit or reorganization path. Our research seeks to explore this
framework for the first time in bankruptcy literature by examining
the association between lockdown enforcement and the likelihood
of triggering a bankruptcy procedure.
2.2.2. Global strategies to face the pandemic crisis
One of the most severe consequences of the COVID-19 pandemic
was the imposition of lockdowns, representing a public health
strategy aimed at hampering the virus spread. During lockdowns,
individuals are subject to self-isolation and travel restrictions, while
firms are forced to temporarily close. Such an environment limits
consumption, as individuals tend to pursue their basic needs, i.e.,
food and health, to the detriment of other secondary needs.
Consequently, firms need to react and adapt to the new market
conditions emerging from the viral contagion. In this sense, Wenzel
et al. (2020) identified four potential strategic responses of firms to
the current crisis, namely, retrenchment by managing reductions in
costs and assets, persevering with measures to maintain business
activities, innovating based on strategic renewal, and exit through
the discontinuation of operational activities. Failures in the first
three responses can lead to a firm’s dissolution. Moreover, failure
risk might increase during a longer period of lockdown, which
completely inhibits a firm’s sales as customers are confronted with
self-isolation. In this sense, Carletti et al. (2020) examined the po­
tential financial impact of lockdown duration using a sample of
80,972 Italian firms. Not surprisingly, their empirical analysis fore­
casted that a three-month lockdown would lead to an aggregate
yearly drop in profits, amounting to 10% of the national GDP and to
the financial distress of 17% of the sample firms.
According to Kraus et al. (2020), the strategic responses of family
firms to the COVID-19 crisis were triggered by the following two
main motivations: safeguarding liquidity and improving the firm’s
long-term survival. The second motivation can be accomplished if
the firm remains on the market; therefore, owners’ key motivation
seems to be maintaining a degree of liquidity that can allow for the
coverage of their fixed costs at the least. In this sense, Didier et al.
(2021) suggested the term hibernation to describe the use of a bare
minimum amount of cash by firms facing social distancing measures
and pandemic lockdown. Such cash should be used to adjust op­
erational activities and freeze a firm’s relationship with stake­
holders. However, the hibernation period may depend on liquidities
that a firm was holding prior to the enforcement of a national
quarantine.
Some evidence of COVID-19′s impact on liquidity was presented
by De Vito and Gómez (2020). Using a sample of 14,245 listed firms
4
According to the order number 2020–341 of March 27, 2020, these provisions
remained in force until August 24, 2020. A more detailed analysis of this govern­
mental order is provided by Lemercier and Mercier (2020).
N. Stef and J.-J. Bissieux
from 26 countries, their empirical analysis indicates that a drop in
sales by 50% and 75% for firms with partial flexibility would lead to
an average increase of short-term liabilities ranging from 216.01% to
779.26%, respectively. Moreover, a larger contraction in demand
would render 10% of firms illiquid within 6 months. Miyakawa et al.
(2021) examined the exit rate of Japanese firms under several as­
sumptions. First, firm exits potentially increased by 20% compared
with the pre-pandemic period, assuming that the temporary re­
duction in sales was anticipated by firms. Second, the increase in exit
rates amounts to almost 110% if sales reduction fully impacted firms’
expectations for future sales. As pointed out by Famiglietti and
Leibovici (2020), the virus spread harmed firms’ revenues and
tightened access to external finance; hence, firms with high levels of
cash or fluid access to funding should more easily cover large ex­
penditures related to wages and overhead costs. Famiglietti and
Leibovici (2020) also argue that firms with less liquidity and more
debt are more prone to bankruptcy given the inability to meet short-
term financial obligations and limited access to external finance.
Overall, the pandemic crisis has put pressure on firms’ capacity to
use internal resources and attract additional funds. Such behavior is
primarily explained by the drop in demand due to the state of
quarantine and firms’ operational functioning in the stage of hi­
bernation. Following Famiglietti and Leibovici (2020), the exit path
as a response to COVID-19 outbreak should have been followed by
firms holding less liquidity and/or more debt prior to lockdown
enforcement. In the context of the COVID-19 pandemic, Amankwah-
Amoah et al. (2021) argued that business failure is more likely for
firms that lack the capacity to quickly alter their business model in
favor of a new routine that facilitates adaptation to the practice of
social distancing and adherence to governments’ new directives.
Moreover, their study asserts that the risk of corporate failure is
likely to increase as authorities cannot rely upon the best practices
to guide policy interventions during the pandemic. If such failure is
imminent, the question of which institutional path a firm should
follow arises.
2.3. How can insolvency be resolved in a pandemic?
As the French government temporarily granted debtors the ex­
clusive right to trigger judicial liquidation during the pandemic, a
relevant question is which insolvency resolution path is suitable for
firms facing financial difficulties. White (1980) noted that the con­
tinuation of business activity should be encouraged when the pre­
sent value of future earnings resulting from a firm’s survival is
higher than the liquidation value of assets. However, the COVID-19
crisis left firms with very limited cash reserves and induced severe
losses to shareholders that would act as residual claimants of a firm’s
assets in case of bankruptcy (Liu et al., 2021). Moreover, Altig et al.
(2020) argued that the COVID-19 crisis led to massive uncertainty
across multiple considerations, such as the duration of social dis­
tancing, changes in consumer spending patterns, the speed of eco­
nomic recovery, travel restrictions, and the impact on business
formation. Hence, the pandemic is assumed to have diminished the
value of future earnings, biasing the path of a financially distressed
firm toward potential liquidation.
In the landscape of French law, amicable liquidation is an exit
path subject to the shareholders’ discretion, whereas initiating ju­
dicial liquidation addresses the debtor’s legal obligation, resulting
from a severe shortage of assets. In the shadow of the pandemic
crisis, the use of amicable liquidation can allow the formation of new
firms, as existing managers and partners may be able to allocate the
liquidation surplus generated by the procedure to an activity that
they plan to conduct in the postcrisis period. Linnenluecke and
4
International Review of Law & Economics 70 (2022) 106063
McKnight (2017) noted that natural disasters open business oppor­
tunities that can encourage entrepreneurs to create value. Never­
theless, amicable liquidation requires that the firm is not confronted
with a payment default and that all creditors are satisfied with the
amount of their reimbursement. The achievement of these two
conditions seems to be hampered by the liquidity crisis induced by
COVID-19. Nonfinancial businesses largely drew funds from bank
credit lines, anticipating disruptions in cash flow and an extreme
deterioration of funding conditions (Li et al., 2020). Guerini et al.
(2020) suggested that the lockdown enforcement produced an un­
precedented increase in the share of illiquid firms, from 3.8% to al­
most 10%, based on a sample of about one million French
nonfinancial companies. Therefore, the pandemic crisis is con­
jectured to have reduced firms’ capacity to settle their debts in full in
order to pursue the path of amicable liquidation, favoring the use of
the court-driven exit. A higher likelihood of judicial liquidation is ex­
pected during the pandemic periods, captured either by the lockdown or
post-lockdown periods.
However, Brown (1989) argued that a set of mutually advanta­
geous reorganization plans are available to firms facing financial
distress. The prospect of business reorganization should be more
attractive to stakeholders when the liquidation of assets generates
high losses and creditors can receive a low degree of reimbursement.
In the context of the pandemic, lockdowns imposed a temporary
shutdown of business activities and restrictions on consumers’ be­
havior. Didier (2021) suggested that firms’ survival could be favored
by hibernation, characterized as the adjustment of operational ac­
tivities to a reduced capacity. Because firms depend on key re­
lationships with some stakeholders (employees, customers, local
authorities, and creditors), business survival also requires that all of
these stakeholders share the burden of the firm’s reduced activity
until the pandemic is overcome. Similarly, Stef (2015) showed that a
firm’s survival is favored by plans that share the costs of re­
organization between the debtor and creditors.
In this situation, why should reorganization be an attractive legal
path during the pandemic? The French restructuring procedures
(sauvegarde and redressement judiciaire) can be useful mechanisms
to support a firm’s hibernation, during which the debtor, along with
the creditors and bankruptcy administrator, can identify efficient
solutions to adapt business operations to the new environment.
According to Le and Phi (2021), a hibernation strategy that includes
the minimization of operations and a reduction in salaries should be
followed by a recovery phase addressing business innovation and
policies aimed at recovering customers. However, the consensus
needed for reorganization can be hampered by conflicts between
unsecured creditors and well-secured creditors (Bergström et al.,
2002). A collateral value closer to the value of the claim can en­
courage some creditors to oppose the firm’s reorganization. Such
conflicts are overcome by the French bankruptcy code because
creditors only vote for the approval of the restructuring plan, while
the relevant court can enforce the plan or a modified version of the
plan, even when creditors initially reject the plan (Blazy and
Chopard, 2012). Thus, the content of the plan must convince only the
judge for a firm to legally restructure its activities. Overall, a higher
likelihood of firms’ restructuring through sauvegarde or redressement
judiciaire procedures can be expected during the pandemic periods.
Firms have also benefited from public measures adopted by the
French government during the pandemic, including addressing the
deferment of social contributions, state-guaranteed loans, and wage
compensations due to activity reductions. According to the OECD
(2021), countries that relied more on financial subsidies and tem­
porary changes than insolvency procedures were able to reduce the
use of bankruptcy at national levels. As argued by Cros et al. (2020),
N. Stef and J.-J. Bissieux
the public measures adopted by the French state can explain the
slowdown of bankruptcy filings by small- and medium-sized en­
terprises, which decreased by 29% by mid-November 2020 com­
pared with those in 2019. By providing financial protection to firms
and employees, the public policies might have diminished the at­
tractiveness of bankruptcy procedures that are recognized to have a
higher degree of debtor friendliness (Blazy et al., 2018). Moreover,
policy intervention that encourages firms’ survival, rather than op­
erational restructuring may lead to business hibernation (Didier
et al., 2021). Hence, the use of bankruptcy procedures (restructuring or
liquidation) is expected to be negatively impacted by the pandemic
periods.
3. Data and variables
We have used the DIANE database of Bureau van Dijk to identify
nonfinancial French firms that were subject to a legal procedure
between January 1, 2019, and March 31, 2021. In this database, we
have identified 4334 firms that were voluntarily dissolved through
an amicable liquidation, 6401 firms that were liquidated in court,
395 firms that triggered a sauvegarde procedure, and 1030 firms that
followed a redressement judiciaire procedure.5 The final sample is
composed of 3448 firms that reported balance sheets and financial
income statements one year prior to the commencement of bank­
ruptcy proceedings. For firms that engaged on a bankruptcy path
between January 1, 2020, and March 31, 2021, we used the financial
data available for 2019, while the financial data available for 2018
was used for the other firms. It should be noted that our sampling
approach has two major limitations. First, our empirical analysis
relies only on firms that triggered a bankruptcy procedure, and thus,
excluded healthy firms that maintained their operations. Second,
firms with missing accounting data were not included in our final
sample; however, the lack of financial data can be associated with a
sign of financial distress. Additionally, we restricted our bankruptcy
analysis on the primary forms of firms’ default resolutions without
considering insolvency procedures that resulted from the conversion
of other procedures.
Overall, we kept 29.33% of the amicable liquidation sample
composed of 4334 firms, 23.09% of the judicial liquidation sample
based on 6401 firms, 56.71% of the sauvegarde sample composed of
395 firms, and 46.12% of the redressement judiciaire sample, which
included 1030 firms. Nevertheless, Blazy and Stef (2020) re­
commended that the sampling method must be close to actual
distribution at the national level. According to Altares D&B, the
number of judicial liquidations represented 67.6% of the total
number of court-driven procedures in 2019 and 72.5% in 2020, the
redressement judiciaire procedures represented 30.5% in 2019 and
25% in 2020, and the sauvegarde procedures accounted for 1.9% in
2019 and 2.6% in 2020.6 In our sample, the distribution of judicial
liquidation procedures is 59.8% of the total number of court-driven
procedures in 2019 and 71.5% in 2020, whereas the redressement
judiciaire procedure represents 29.6% in 2019 and 17.9% in 2020.
Overall, the distribution of court-driven procedures is close to the
distribution of procedures at national level, with the exception of the
sauvegarde procedure that has a large weight (10.6% in 2019 and
10.5% in 2020). However, we have decided to keep all of the ob­
servations for the sauvegarde procedure because the application of
5 other available alternatives. The multinomial logit model is
We have manually identified the firms that triggered a sauvegarde procedure or
redressement judiciaire procedure using www.societe.com and www.procedur­
ecollective.fr based on the French Official Bulletin of Civil and Commercial
Announcements. The bulletin is a public journal of legal announcements of all the acts
registered in the Trade and Companies Register of France.
6
Data on the annual number of amicable liquidations are not available for France.
5
International Review of Law & Economics 70 (2022) 106063
the national weights would lead to the use of 65 firms instead of
224 firms.
Fig. 2 presents the distribution of our sample according to four
major pandemic periods that were enforced by French public au­
thorities, namely, the period of the first lockdown (First Lockdown),
the period between the first and second lockdown (First Post-lock­
down), the period of the second lockdown (Second Lockdown), and
the period after the second lockdown (Second Post-lockdown).7 Al­
most 20.2% of sample firms were liquidated during the period be­
tween the two lockdowns, which accounts for nearly six months.
Among the periods studied, about 39% of corporate restructuring
occurred during that period. The lifting of the lockdown implied not
only the cessation of travel restrictions for individuals but also the
reopening of the French commercial courts in charge of adminis­
tering bankruptcy procedures.
We have constructed two sets of data. The first set of accounting
variables includes those that were reported one year prior to the
initiation of the procedure dealing with firms’ performance (EBITDA/
TA and ROA), financial needs (LEV and WC/TA), level of capital (TA and
Equities), and liquidity (CR and QR). The second set captures firms’
features, such as age (AGE), partnership legal form (Legal Form), and
activity sector type (Industry, Trade, Transport, or Restaurant).
Additionally, we also included the 2019 level of investment ex­
penditures per capita at a regional level (Invest) as a proxy of local
development. Detailed definitions of our variables are presented in
Table 1.
Average and median values of our variables are presented in
Table 2 for each subsample of firms facing amicable liquidation
(column 1), judicial liquidation (column 2), the sauvegarde proce­
dure (column 3), and the redressement judiciaire procedure (column
4). Several observations can be drawn from the summary statistics.
First, firms that engaged in an out-of-court debt settlement were
associated with a low operational or economic performance (EBITDA/
TA and ROA) and a high degree of indebtedness (LEV). Additionally,
firms that settled debts in court through judicial liquidation, on
average, had the lowest equity value (Equity), implying less financial
involvement from owners. Second, firms that were able to trigger a
sauvegarde procedure were, on average, the largest firms in our
sample (TA) and were also associated with high values of owners’
investment (Equity); however, firms subject to a redressement judi­
ciaire procedure, on average, present low degrees of liquidity (CR and
QR). The procedure of redressement judiciaire was designed for firms
in payment default, which generally occurs when firms lack li­
quidity. Third, the subsample of out-of-court exits includes firms
that have, on average, less experience (AGE), are primarily non­
partnership firms (Legal Form), and operate in the industry and trade
sectors. Fourth, t-tests for differences in means between the sub­
samples suggest that the four subsamples statistically differ in terms
of indebtedness degree (LEV), firm’s size (TA), and liquidity (CR
and QR).
4. Empirical analysis
4.1. Multinomial probit approach
According to Cheng and Long (2007), the most commonly used
econometric model to examine discrete choice data is the multi­
nomial logit model. However, this approach relies on the assumption
of independence of irrelevant alternatives (IIA), assuming that the
choice between two alternatives is not affected by the features of
7
The first lockdown covers the period from March 17, 2020, to May 5, 2020,
whereas the second lockdown was the period from October 30, 2020, to December
14, 2020.
N. Stef and J.-J. Bissieux International Review of Law & Economics 70 (2022) 106063

ī
īī
ī

Fig. 2. Sample distribution.

Table 1
Variables.

Procedure Variable equal to 0 if the firm was subject to an amicable liquidation, 1 to a judicial liquidation, 2 to a sauvegarde procedure and 3 to a
redressement judiciaire procedure.
First Lockdown Dummy variable equal to 1 if the bankruptcy procedure was triggered during the first lockdown of 2020 and 0 otherwise.
First Post-Lockdown Dummy variable equal to 1 if the bankruptcy procedure was triggered between the first lockdown and the second lockdown of 2020 and 0
otherwise.
Second Lockdown Dummy variable equal to 1 if the bankruptcy procedure was triggered during the second lockdown of 2020 and 0 otherwise.
Second Post-Lockdown Dummy variable equal to 1 if the bankruptcy procedure was triggered after the second lockdown of 2020 and 0 otherwise.
EBITDA/TA Earnings before interest, taxes, depreciation, and amortization as a percentage of total assets.
LEV Ratio between the value of total debts and the value of total assets.
TA Value of total assets.
CR Ratio between current assets and current liabilities.
ROA Ratio between the net income and the value of total assets.
WC/TA Ratio between the working capital and the value of total assets.
Equity Value of firm’s equity.
QR Current assets less inventories divided by current liabilities.
Age Age of firm measured in years.
Legal Form Dummy variable that identifies partnership firms.
Industry Dummy variable that identifies industrial firms.
Trade Dummy variable that identifies firms operating in the trade sector.
Transport Dummy variable that identifies transport firms.
Restaurant Dummy variable that identifies firms with restaurant activities.
Invest Investment expenditures per capita at regional level.

Notes: Our financial variables were extracted from the DIANE database of Bureau van Dijk while Invest from the INSEE (French Institute of Statistics and Economic Studies).

inappropriate when this assumption is violated (Powers and Xie,
2008). The Hausman and McFadden (1984) test and Small and Hsiao
(1985) test confirm that the IIA assumption is rejected for our data
set. Referencing Bowen and Wiersema (2004), the multinomial
probit model (MPM) can be used in this case because it does not
impose the IIA assumption, allowing the errors across different al­
ternatives to be correlated. A similar solution was also applied by
other studies, examining firms’ exit routes, such as Ponikvar et al.
(2018) and Peljhan et al. (2020). As our main goal is to investigate
how the enforcement of lockdowns relates to the likelihood of an
institutional path, we use the following MPM:
Pandemic is a vector composed of First Lockdown, First Post-lockdown,
Second Lockdown, and Second Post-lockdown; Accounting is the vector
of accounting variables lagged one year prior to the opening of the
procedure (EBITDA/TA, LEV, and a logarithm of TA and CR),8 whereas
Features is the vector of additional explanatory variables (logarithm
of Age, Legal Form, Industry, Trade, Transport, Restaurant, and a
logarithm of Invest).9
One concern regarding our empirical framework is that a pre vs.
post analysis does not account for inherent trends in outcomes.10
Our analysis would have benefited from a control group of firms not
subject to lockdown or the pandemic crisis; however, as both

Prob (Procedurei = j) = Γ (α0 + α1 Pandemici + α2 Accountingi + α3

Featuresi + ξi) (1)
where i is the firm’s index and Γ is the multinomial probit function;
Procedure is the dependent variable that equals 0 if the firm was
subject to an amicable liquidation, 1 for a judicial liquidation, 2 for a
sauvegarde procedure, and 3 for a redressement judiciaire procedure.
8
The vector of accounting variables relies on variables that were found to have an
explanatory power for firms’ exit paths, such as voluntary dissolution or involuntary
liquidation (Irfan et al., 2018; Jabeur and Fahmi, 2018; Ponikvar et al., 2018; Stef and
Zenou, 2021).
9
The multinomial logit approach provides similar results to the multinomial probit
model (results available upon request).
10
We are grateful to an anonymous referee for pointing out this issue.

6
 N. Stef and J.-J. Bissieux

Table 2
Summary statistics. Average and median values per subsample.

Subsamples

Variables Amicable Liquidation (1.) Judicial Liquidation (2.) Sauvegarde (3.) Redressement (4.) 1. vs 2. t-test 1. vs 3. t-test 1. vs 4. t-test 2. vs 3. t-test 2. vs 4. t-test 3. vs 4. t-test

A. Pandemic periods
First Lockdown 0.043 (.) 0.051 (.) 0.058 (.) 0.051 (.) 0.358 0.329 0.517 0.646 0.985 0.680
First Post-Lockdown 0.202 (.) 0.297 (.) 0.214 (.) 0.156 (.) 0.000 *** 0.679 0.028 ** 0.010 ** 0.000 *** 0.057 *
Second Lockdown 0.070 (.) 0.073 (.) 0.147 (.) 0.078 (.) 0.758 0.000 *** 0.572 0.000 *** 0.727 0.004 ***
Second Post-Lockdown 0.103 (.) 0.150 (.) 0.121 (.) 0.114 (.) 0.000 *** 0.433 0.522 0.242 0.047 ** 0.792
B. Accounting variables
EBITDA/TA − 0.241 (0.070) 0.044 (0.004) − 0.021 (0.000) − 0.104 (−0.017) 0.052 * 0.539 0.578 0.559 0.057 * 0.005 ***
LEV 9.445 (3.277) 0.679 (0.218) 0.941 (0.845) 1.200 (0.958) 0.000 *** 0.000 *** 0.000 *** 0.111 0.000 *** 0.001 ***
TA (K€) 742.418 (273.4) 3240.32 (740.4) 9413.6 (1831.2) 2895.14 (878.4) 0.000 *** 0.000 *** 0.000 *** 0.000 *** 0.582 0.000 ***
CR 3.969 (1.624) 1.413 (1.087) 1.934 (1.123) 1.118 (0.927) 0.000 *** 0.001 *** 0.000 *** 0.012 ** 0.015 ** 0.000 ***
ROA − 0.661 (0.019) 0.108 (0.003) − 0.091 (−0.017) − 0.246 (−0.066) 0.000 *** 0.123 0.095 * 0.080 * 0.000 *** 0.003 ***
WC/TA 0.397 (0.108) 0.077 (0.000) − 0.011 (0.045) − 0.220 (−0.080) 0.148 0.467 0.110 0.289 0.000 *** 0.000 ***
Equity (K€) 740.828 (166.1) 358.214 (101.5) 2770.84 (404.5) 851.710 (208.9) 0.000 *** 0.000 *** 0.548 0.000 *** 0.001 *** 0.005 ***

7
QR 1.140 (0.947) 3.669 (1.161) 1.584 (0.879) 0.860 (0.696) 0.000 *** 0.009 *** 0.001 *** 0.000 *** 0.000 *** 0.001 ***
C. Firm’s features
Age 13.327 (9) 15.990 (11) 16.545 (11) 16.589 (13) 0.000 *** 0.001 *** 0.000 *** 0.597 0.429 0.970
Legal Form 0.329 (.) 0.468 (.) 0.531 (.) 0.465 (.) 0.000 *** 0.000 *** 0.000 *** 0.078 * 0.911 0.104
Industry 0.228 (.) 0.418 (.) 0.246 (.) 0.360 (.) 0.000 *** 0.570 0.000 *** 0.000 *** 0.025 ** 0.003 ***
Trade 0.359 (.) 0.225 (.) 0.295 (.) 0.234 (.) 0.000 *** 0.064 * 0.000 *** 0.021 ** 0.682 0.084 *
Transport 0.026 (.) 0.074 (.) 0.031 (.) 0.046 (.) 0.000 *** 0.652 0.030 ** 0.017 ** 0.034 ** 0.352
Restaurant 0.118 (.) 0.055 (.) 0.094 (.) 0.095 (.) 0.000 *** 0.279 0.157 0.022 ** 0.002 *** 0.967
Invest (€) 159.795 (156) 160.054 (156) 168.290 (156) 170.459 (153) 0.896 0.038 ** 0.003 0.058 * 0.004 *** 0.779
Number of firms: 1271 1478 224 475

Notes: Average values of the variables are reported for each subsample of firms dealing with the amicable liquidation (column 1), the judicial liquidation (column 2), the sauvegarde procedure (column 3) and the redressement judiciaire
procedure (column 4). Median values are included in the brackets. p-values of the t-tests for difference in means between the subsamples are reported in the last columns. * implies a difference in means that is significant at the 10% level,
** at the 5% level and *** at the 1% level.
International Review of Law & Economics 70 (2022) 106063
N. Stef and J.-J. Bissieux International Review of Law & Economics 70 (2022) 106063

Table 3
French bankruptcy procedures and pandemic periods.

Lag = 1 year Lag = 2 years

Variable Amicable Judicial Sauvegarde (3) Redressement (4) Amicable Judicial Sauvegarde (7) Redressement
Liquidation (1) Liquidation (2) Liquidation (5) Liquidation (6) (8)

First Lockdown − 0.021 0.045 − 0.003 − 0.022 − 0.067 0.083 * 0.009 − 0.025
(0.046) (0.042) (0.014) (0.020) (0.045) (0.046) (0.019) (0.026)
First Post-Lockdown − 0.093 0.168 *** − 0.013 − 0.062 *** − 0.094 *** 0.186 *** − 0.015 − 0.077 ***
(0.027) (0.025) (0.008) (0.011) (0.025) (0.025) (0.009) (0.013)
Second Lockdown − 0.049 0.026 0.044 ** − 0.020 − 0.033 0.004 0.048 ** − 0.018
(0.039) (0.035) (0.019) (0.017) (0.041) (0.040) (0.020) (0.022)
Second Post-Lockdown − 0.103 *** 0.128 *** − 0.001 − 0.024 * − 0.100 *** 0.150 *** − 0.007 − 0.042 **
(0.033) (0.031) (0.011) (0.014) (0.030) (0.031) (0.012) (0.016)
EBITDA/TA lag 0.016 − 0.002 − 0.002 − 0.012 * 0.026 ** − 0.009 − 0.005 *** − 0.012 ***
(0.011) (0.010) (0.002) (0.007) (0.011) (0.012) (0.001) (0.003)
LEV lag 0.067 *** − 0.055 *** − 0.005 *** − 0.007 ** 0.049 *** − 0.024 ** − 0.008 *** − 0.018 ***
(0.015) (0.014) (0.001) (0.002) (0.009) (0.013) (0.002) (0.003)
Logarithm (TA lag) − 0.292 *** 0.125 *** 0.083 *** 0.084 *** − 0.253 *** 0.112 *** 0.073 *** 0.068 ***
(0.027) (0.026) (0.009) (0.013) (0.025) (0.023) (0.009) (0.013)
CR lag 0.049 *** − 0.012 0.002 − 0.039 *** 0.044 *** − 0.029 *** 0.001 − 0.017 **
(0.009) (0.009) (0.018) (0.005) (0.010) (0.012) (0.003) (0.007)
Logarithm (Age lag) 0.084 *** − 0.076 *** − 0.017 ** 0.009 0.044 * − 0.027 − 0.015 * − 0.002
(0.025) (0.022) (0.008) (0.012) (0.026) (0.024) (0.009) (0.015)
Legal Form − 0.072 *** 0.055 *** 0.004 0.013 − 0.093 *** 0.061 *** 0.010 0.022
(0.021) (0.019) (0.007) (0.011) (0.022) (0.021) (0.009) (0.014)
Industry − 0.107 *** 0.131 *** − 0.025 *** 0.000 − 0.111 *** 0.144 *** − 0.030 *** − 0.004
(0.028) (0.025) (0.008) (0.013) (0.028) (0.027) (0.009) (0.017)
Trade 0.064 ** − 0.044 * − 0.002 − 0.017 0.080 *** − 0.047 * − 0.006 − 0.027
(0.029) (0.026) (0.009) (0.014) (0.030) (0.028) (0.010) (0.017)
Transport − 0.219 *** 0.252 *** − 0.022 * − 0.011 − 0.194 *** 0.235 *** − 0.027 ** − 0.014
(0.048) (0.046) (0.012) (0.023) (0.044) (0.047) (0.013) (0.030)
Restaurant 0.082 ** − 0.113 *** 0.021 0.009 0.077 * − 0.122 *** 0.026 0.019
(0.038) (0.033) (0.018) (0.021) (0.042) (0.038) (0.021) (0.027)
Logarithm (Invest) − 0.027 − 0.056 0.024 0.058 − 0.133 0.032 0.027 0.074
(0.092) (0.082) (0.035) (0.049) (0.114) (0.108) (0.041) (0.063)
Observations 3488 2899
Wald chi-square 745.59 *** 616.20 ***
Log pseudolikelihood − 3121.4 − 2912.4
Maximum VIF 1.57 1.58
Prediction rate (%) 66.03% 59.68%

Notes: Marginal effects at the mean were estimated using a multinomial probit regression with robust standard errors. The dependent variable is a dummy variable that is equal to
0 if the firm was subject to an amicable liquidation, 1 to a judicial liquidation, 2 to a sauvegarde procedure and 3 to a redressement judiciaire procedure. The prediction rate (%)
represents the percentage of correctly predicted observations. Delta-method standard errors are included in the brackets. * implies a significant coefficient at the 10% level, ** at 5%
level, and *** at the 1% level. Detailed definitions of the variables are presented in Table 1.

lockdowns were enforced over the entire population of French firms,
the assessment of our research question can only rely on a com­
parison with the pre-pandemic period. This is why we considered a
large pre-pandemic subsample covering the period from January 1,
2019, to March 16, 2020. Additionally, Karlson et al. (2012) demon­
strated that the size of the estimated coefficients depends on the
other explanatory variables included in an econometric specifica­
tion. In this sense, Wulff (2015) noted that a positive (negative)
coefficient does not necessarily correspond to an increase (decrease)
in the probability of a certain outcome, whereas the nonlinear re­
lationship between an explanatory variable and that probability can
even change sign of the coefficient. Consequently, Wulff (2015) ar­
gues that the interpretation of the results should rely on the mar­
ginal effects and predicted probabilities. Given that the sign of the
coefficient cannot be used to assess the relationship between the
dependent variable and pandemic periods, our interpretation will
follow Wulff’s (2015) recommendations.
4.2. Estimates
An amicable liquidation or the sauvegarde procedure can be trig­
gered by firms that are not in default of payment so that the creditors’
claims can be settled in full. According to Harada (2007), the prob­
ability of economic-forced exit is high for firms with loans from fi­
nancial institutions and declining sales. Similarly, Balcaen et al. (2012)
demonstrated that firms with less debt and high levels of cash tend to
follow a voluntary exit more often than a court-driven exit. Conse­
quently, we should expect firms holding more liquidity (CR) and pre­
viously operating with high levels of performance (EBITDA/TA) to have
a higher likelihood of amicable liquidation or the sauvegarde proce­
dure. Although a high level of debt (LEV) can be associated with more
financial interests that can weaken reimbursement capacity, firms’ size
can relate to the institutional path in two ways. More assets can imply
higher stakeholder dependence, as captured in an extensive network
of partners and creditors (Balcaen et al., 2011). Therefore, a voluntary
liquidation decision can be complex and a firm’s negotiations with
creditors can be long. A court-driven procedure (judicial liquidation,
sauvegarde procedure, and redressement judiciaire procedure) can be
triggered by firms because of the high costs required by the co­
ordination of creditors (Bruche, 2011). In contrast, valuable assets can
be easily converted into cash, allowing large firms to prevent credit
default and embark on an amicable liquidation rather than on a court-
driven procedure.
In Table 3, we present the marginal effects at the mean for our
four procedures when the accounting variables and Age lag by one
year (columns 1–4) and two years (columns 5–8).11 Our results
suggest that the probability of a judicial liquidation (column 2)
11
We used the command margins in STATA 14.2 to compute the marginal effects. In
the case of dummy variables, margins calculate the discrete first difference from the
base category.

8
N. Stef and J.-J. Bissieux
Fig. 3. Monthly averages of predicted probabilities. Estimates based on the first econometric specification.
increased, on average, by 16.8% in the first post-lockdown period and
by 12.8% in the second post-lockdown period, compared with the
period prior to the first lockdown. These effect sizes are larger when
we consider the two-year lag specification, ranging from 18.6% to
15%. Surprisingly, the probability of triggering a redressement judi­
ciaire procedure after the first lockdown was, on average, 6.2% lower
(column 4) than the probability of triggering a similar procedure
prior to the pandemic crisis. The new environment that emerged,
based on travel restrictions and social distancing, following the first
lockdown harmed the capacity of defaulted firms to reorganize their
activities in court. In contrast, non-defaulted firms had, on average,
more chances to restructure their operations through a sauvegarde
procedure during the second lockdown (columns 3 and 7). These
firms likely took advantage of the lockdown context to negotiate
with creditors and identify solutions with the court administrator to
facilitate the firm’s adaptation to the new environment.
In terms of control variables, the likelihood of amicable liquida­
tion was high for firms with high levels of debt (LEV) and liquidity
(CR). Holding an asset value (logarithm (TA)) higher by 1% in the year
previous to commencement of a bankruptcy procedure increased
the probability of a court-driven procedure by 5.4% for judicial li­
quidation (column 2) and 3.6% for the sauvegarde procedure (column
3) and the redressement judiciaire procedure (column 4).12 The latter
result suggests that large firms had a high likelihood of legally re­
structuring operations. Given that such firms must manage high
stakeholder dependence (Balcaen et al., 2011), out-of-court nego­
tiations with a large cohort of partners and creditors may fail. Ad­
ditionally, on average, industrial and transport firms had a high
12
Effect sizes were calculated by multiplying the coefficients with the base 10
logarithm of 1.01.
9
International Review of Law & Economics 70 (2022) 106063
likelihood of liquidating assets in court (columns 2 and 6) and a low
likelihood of an out-of-court exit (columns 1 and 5). Table 3 also
offers some insights regarding the consistency of our regressions.
First, no severe multicollinearity was detected, as the maximum
variance inflation factor is below 10. Second, the proportion of cor­
rectly predicted cases is higher than 65% only for the econometric
specification based on the one-year lag. Third, the Wald test con­
firms that at least one coefficient is statistically different than zero.
We next graph the predicted probabilities of MPM by type of
institutional path.13 This approach allows us to better understand
the changes in these predicted probabilities following the two
lockdowns. Fig. 3 shows the evolution of the monthly averages of
predicted probabilities that were estimated in columns 1–4 of
Table 3. The strongest evidence that confirms the previous findings
primarily relates to the three court-driven procedures. In the case of
judicial liquidation, the average predicted probability increased from
36.5% prior to the pandemic crisis to 55% during the first post-
lockdown period and slightly lowered to 51.7% during the second
post-lockdown period. This finding is also strengthened by the es­
timates in Appendix A that shows the coefficients using the multi­
nomial probit approach by considering the group of firms subject to
judicial liquidation as the comparison group. Additionally, the
average likelihood of a sauvegarde procedure reached the highest
value of 12% during the second lockdown. It is also notable that the
largest drop in the likelihood of the redressement judiciaire procedure
occurred during the period between the two lockdowns. This result
was also confirmed in column 4 of Table 3.
13
For a given firm, MPM predicts a probability for each of the four institutional
paths. The sum of the four predicted probabilities is equal to 1.
N. Stef and J.-J. Bissieux International Review of Law & Economics 70 (2022) 106063

Table 4
French bankruptcy procedures and pandemic periods. Alternative accounting variables.

Lag = 1 year Lag = 2 years

Variable Amicable Judicial Sauvegarde (3) Redressement (4) Amicable Judicial Sauvegarde (7) Redressement
Liquidation (1) Liquidation (2) Liquidation (5) Liquidation (6) (8)

First Lockdown − 0.097 ** 0.080 * 0.010 0.006 − 0.078 * 0.045 0.046 − 0.013
(0.042) (0.048) (0.021) (0.023) (0.043) (0.051) (0.030) (0.032)
First Post-Lockdown − 0.137 *** 0.190 *** − 0.022 ** − 0.030 *** − 0.111 *** 0.178 *** − 0.013 − 0.054 ***
(0.024) (0.025) (0.011) (0.010) (0.024) (0.028) (0.012) (0.016)
Second Lockdown − 0.087 ** 0.041 0.037 0.009 − 0.052 − 0.011 0.059 ** 0.003
(0.037) (0.044) (0.023) (0.018) (0.037) (0.044) (0.027) (0.028)
Second Post-Lockdown − 0.158 *** 0.147 *** 0.009 0.002 − 0.124 *** 0.161 *** − 0.010 − 0.027
(0.027) (0.032) (0.016) (0.014) (0.029) (0.033) (0.015) (0.021)
ROA lag 0.001 0.004 − 0.003 * − 0.002 0.031 *** − 0.008 − 0.008 ** − 0.015 **
(0.006) (0.006) (0.002) (0.002) (0.011) (0.010) (0.003) (0.010)
WC/TA lag 0.010 *** − 0.006 * − 0.002 *** − 0.001 ** 0.023 *** − 0.010 * − 0.006 *** − 0.008 ***
(0.004) (0.003) (0.001) (0.001) (0.007) (0.005) (0.001) (0.002)
Logarithm (Equity lag) 0.132 *** − 0.233 *** 0.062 *** 0.039 *** 0.111 *** − 0.238 *** 0.064 *** 0.064 ***
(0.017) (0.018) (0.007) (0.007) (0.016) (0.019) (0.008) (0.011)
QR lag − 0.031 ** 0.053 *** 0.003 − 0.025 *** − 0.058 *** 0.068 *** 0.005 − 0.014
(0.012) (0.012) (0.003) (0.004) (0.007) (0.010) (0.004) (0.015)
Logarithm (Age lag) − 0.119 *** 0.083 *** 0.017 0.019 ** − 0.095 *** 0.068 *** 0.009 0.019
(0.023) (0.024) (0.010) (0.010) (0.024) (0.026) (0.012) (0.016)
Legal Form − 0.156 *** 0.114 *** 0.024 ** 0.019 ** − 0.153 *** 0.100 *** 0.022 ** 0.031 **
(0.020) (0.021) (0.010) (0.009) (0.021) (0.023) (0.010) (0.015)
Industry − 0.198 *** 0.208 *** − 0.024 ** 0.013 − 0.183 *** 0.194 *** − 0.031 *** 0.020
(0.025) (0.027) (0.011) (0.012) (0.025) (0.029) (0.012) (0.019)
Trade 0.035 − 0.023 − 0.011 − 0.002 0.038 − 0.009 − 0.012 − 0.017
(0.028) (0.030) (0.012) (0.012) (0.029) (0.032) (0.013) (0.020)
Transport − 0.244 *** 0.303 *** − 0.039 *** − 0.021 − 0.208 *** 0.304 *** − 0.051 *** − 0.046
(0.034) (0.040) (0.013) (0.020) (0.035) (0.045) (0.011) (0.031)
Restaurant 0.134 *** − 0.149 *** 0.005 0.010 0.136 *** − 0.121 ** − 0.006 − 0.010
(0.044) (0.044) (0.022) (0.021) (0.049) (0.014) (0.023) (0.033)
Logarithm (Invest) 0.076 − 0.124 0.034 0.014 − 0.044 0.011 − 0.021 0.053
(0.091) (0.101) (0.053) (0.048) (0.092) (0.102) (0.057) (0.077)
Observations 2487 2237
Wald chi-square 513.25 *** 490.83 ***
Log pseudolikelihood − 2396.2 − 2295.0
Maximum VIF 1.60 1.60
Prediction rate (%) 60.07% 57.58%

Notes: Marginal effects at the mean were estimated using a multinomial probit regression with robust standard errors. The dependent variable is a dummy variable that is equal to
0 if the firm was subject to an amicable liquidation, 1 to a judicial liquidation, 2 to a sauvegarde procedure and 3 to a redressement judiciaire procedure. The prediction rate (%)
represents the percentage of correctly predicted observations. Delta-method standard errors are included in the brackets. * implies a significant coefficient at the 10% level, ** at 5%
level, and *** at the 1% level. Detailed definitions of the variables are presented in Table 1.

4.3. Robustness check
Following Stef and Zenou (2021), we assess the robustness of our
findings using an alternative set of accounting variables composed of
ROA, WC/TA, the logarithm of Equity,14 and QR.15 Estimates are pre­
sented in Table 4. Surprisingly, the likelihood of an amicable liqui­
dation decreased by 9.7% during the first lockdown, 13.7% after the
first lockdown, 8.7% during the second lockdown, and 15.8% after the
second lockdown (column 1). However, these marginal effects are
estimated using only 71.3% of the initial sample. The other results
regarding court-driven procedures are robust compared with the
previous findings. Table 4 shows that the effect sizes are large for
First Post-lockdown and Second Post-lockdown, mainly in the case of
judicial liquidation. An average increase in the likelihood of court-
driven exits, ranging from 14.7% to 19%, should have been expected
in the post-quarantine periods.
Moreover, firms with a high level of equity were associated with
a high probability of voluntary liquidation (columns 1 and 5) or
reorganization (columns 3, 4, 7, and 8). Similar findings are also
14
We treated the negative values of Equity as equal to 0 in the log-transformed
function.
15
Table 7 in Appendix C reports an additional robustness test by including regional
effects in the econometric specification of Eq. (1). The previous findings remain
robust.
presented in Appendix B, which considers the estimated coefficients
of this robustness check. Owners can benefit from the residual value
of assets if one of the voluntary liquidation or reorganization pro­
cedures is triggered. According to Carletti et al. (2020), the pandemic
crisis not only drained the level of liquidity but also eroded the
equity capital of firms severely impacted by the lockdown enforce­
ment and reported high leverage and a small size prior to the crisis.
Large investments encouraged owners to settle all firms’ claims
outside of court or to restructure business activities. Interestingly,
the marginal effects of QR seem to provide an opposite sign for the
two liquidation procedures compared with the marginal effects of CR
from Table 3. The major difference between the two liquidity ratios
is that QR includes only current assets that can be converted into
cash in less than three months. When the value of a firm’s inventory
is excluded from the liquidity measure, the likelihood of judicial li­
quidation is subject to an average increase of 5.3%, while the like­
lihood of amicable liquidation is subject to an average decrease of
3.1%, following a 1% increase in QR. Hence, the value of firms’ in­
ventory can have a significant influence in the arbitration between
the two liquidation procedures.
We complete the robustness test with a graphical analysis based
on the monthly averages of the predicted probabilities from columns
1–4 of Table 4. Fig. 4 reveals opposing patterns for amicable and
judicial liquidation. The average likelihood of amicable liquidation
progressively decreased from 43.9% (before the first lockdown) to
29.7% (after the second lockdown), whereas the average likelihood of

10
N. Stef and J.-J. Bissieux
Fig. 4. Monthly averages of predicted probabilities. Estimates based on the second econometric specification.
judicial liquidation increased to 56.3%, mainly during the first post-
lockdown period. On a different note, the likelihood of firms’ re­
structuring severely decreased during the period between the two
lockdowns, during which the average likelihood of a sauvegarde
procedure was 4.5% and that of a redressement judiciaire procedure
was 6.6%.
5. Concluding remarks
This study investigates how the lockdown enforcement by French
authorities is associated with the resolution of corporate insolvency.
In this sense, we make a distinction between four legal procedures,
namely the amicable liquidation (out-of-court exit), the judicial li­
quidation (court-driven exit), the restructuring procedure of sauve­
garde available to non-defaulted firms, and the restructuring
procedure of redressement judiciaire available to defaulted firms.
Using a sample of 3488 non-listed French firms, our estimates yield
three major findings. First, the likelihood of judicial liquidation in­
creased after the lifting of the quarantines compared to the pre-
pandemic period. Second, the non-defaulted firms had a higher
likelihood to reorganize in court during the second lockdown. Third,
the lifting of the first lockdown led to a decrease in the probability of
restructuring the assets of defaulted firms.
11
International Review of Law & Economics 70 (2022) 106063
Although the main objective of the lockdown was to limit the
spread of the virus, its enforcement has not provided strong in­
centives to exit through an out-of-court procedure such as the
amicable liquidation. As a matter of fact, our estimates report an
expected average increase in the likelihood of court-driven exit
ranging from 12.8% to 19% points during the post-lockdown periods.
Bernstein et al. (2019) argued that a firm’s liquidation driven by the
court can lead to an inefficient allocation of assets in the presence of
local market frictions. Considering that the pandemic produced li­
quidity shortcomings, finding a potential user for firms’ assets may
require high search costs that can increase the bankruptcy costs and
limit the creditors’ debt recovery. Therefore, the use of the amicable
liquidation should be encouraged during and after the pandemic
crisis because it can accelerate the allocation of assets to more
successful entrepreneurs. Moreover, longer bankruptcy delays can
prevent financially distressed firms from exiting and, also, the for­
mation of new firms (Melcarne and Ramello, 2020). Hence, the
pressure on the insolvency courts may be diminished through the
promotion of the out-of-court exit.
Nevertheless, the judicial liquidation can represent a solution
to the exit of firms severely affected by the COVID-19 crisis, called
“zombie” companies. Demary (2021) employed the concept of
“zombification” to describe firms that survive without having the
pressure to restructure their activities to stay in the market. Such
N. Stef and J.-J. Bissieux
“zombification” can be supported by government’s rescues mea­
sures or even debt deleveraging that can disempower the man­
agers and reduce their incentives to maintain the firm’s
competitiveness. Not surprisingly, the COVID-19 crisis led to an
average 37% drop in judicial liquidations on French territory in
2020 compared to 2019 due to the massive support from the State
to private companies through a system of financial aid (solidarity
fund and loan guaranteed by the State). If the creditors’ right to
trigger the debtor’s liquidation is restricted, one may expect more
“zombification” among firms facing financial difficulties. Philippon
(2021) pointed out that a laissez-faire public approach can lead to
excessive liquidation while the efficient reallocation of assets can
be hampered by an indiscriminate bailout of firms. Hence, public
measures aimed to restore the financial health of firms affected by
the pandemic must limit the incentives of non-viable firms to
continue their operations.
Based on our findings, firms in default of payment had difficulty
engaging in restructuring, mainly during the first post-lockdown
period. However, court-driven reorganization procedures can offer
useful mechanisms to preserve the value of assets, particularly
during a pandemic. According to James (2016), firms can strategi­
cally file for a restructuring procedure not only to preserve more
asset value for business stakeholders but also to stem the decline in
performance through measures aimed at overcoming others’ com­
petitive advantages. Conflicts of interests between creditors and
other stakeholders can be mitigated by preserving the firm’s value.
Using a legal index based on a scale from 0% (no protection) to 100%
(high level of protection), Blazy et al. (2018) revealed that the re­
dressement judiciaire procedure can provide a high degree of asset
protection (82%), close to the protection provided by judicial liqui­
dation (91%). Additionally, restructuring seems to be less costly for
shareholders and creditors. If the commercial courts can diminish
the risk of filtering failure, this could lead to increased restructuring
Appendix A
See Table 5.
12
International Review of Law & Economics 70 (2022) 106063
of nonviable firms and liquidation of viable firms (Fisher and Martel,
2004; Laitinen, 2011; Stef, 2017). The use of a court-driven re­
organization should be encouraged during and after the pandemic
crisis, as it can allow preservation of both asset value and em­
ployment.
However, it should be noted that our findings are based on short-
term results that considered only the two French lockdowns that
were enforced in 2020. A long-term empirical approach that in­
tegrates additional observation years and other potential lockdown
periods would be suitable to comprehensively investigate the re­
lationship between the pandemic crisis and firms’ failure. An ana­
lysis regarding insolvency resolution during the pandemic periods
can also be further expanded to different legal systems, such as the
common law system, which is mainly recognized for its creditor-
friendly orientation that opposes the debtor-friendly orientation
associated with the civil law systems. Understanding the con­
sequences of the arbitration between the protection of creditors’
interest and employment preservation (firm survival) is of major
importance for legislators seeking to accelerate the recovery of the
national economy in the post-pandemic context.
CRediT authorship contribution statement
Nicolae Stef: Formal analysis, Methodology, Writing – original
draft, Writing – review & editing, Funding acquisition, Visualization
Jean-Joachim Bissieux: Conceptualization, Resources.
Acknowledgments
The authors acknowledge support from the Bourgogne-Franche-
Comté Regional Council (Project COVID-ENT). We are also grateful to
Antoine Jolly and two anonymous referees for their insightful com­
ments.
N. Stef and J.-J. Bissieux International Review of Law & Economics 70 (2022) 106063

Table 5
Multinomial probit approach. French bankruptcy procedures and pandemic periods.

Lag = 1 year Lag = 2 years

Variable Amicable Liquidation (1) Sauvegarde (2) Redressement (3) Amicable Liquidation (4) Sauvegarde (5) Redressement (6)

First Lockdown − 0.133 − 0.129 − 0.244 − 0.302 * − 0.061 − 0.287

(0.163) (0.205) (0.184) (0.176) (0.211) (0.194)
First Post-Lockdown − 0.515 *** − 0.520 *** − 0.798 *** − 0.553 *** − 0.524 *** − 0.790 ***
(0.094) (0.124) (0.103) (0.095) (0.132) (0.108)
Second Lockdown − 0.146 0.346 ** − 0.188 − 0.080 0.389 ** − 0.096
(0.137) (0.161) (0.153) (0.158) (0.170) (0.159)
Second Post-Lockdown − 0.453 *** − 0.278 * − 0.419 *** − 0.499 *** − 0.360 ** − 0.509 ***
(0.120) (0.156) (0.124) (0.119) (0.162) (0.128)
EBITDA/TA lag 0.032 − 0.020 − 0.074 0.071 − 0.039 − 0.043
(0.040) (0.032) (0.054) (0.045) (0.033) (0.034)
LEV lag 0.241 *** 0.057 0.075 * 0.150 *** − 0.037 − 0.045
(0.061) (0.043) (0.043) (0.037) (0.031) (0.030)
Logarithm (TA lag) − 0.799 *** 0.744 *** 0.265 *** − 0.746 *** 0.563 *** 0.121
(0.101) (0.088) (0.076) (0.095) (0.103) (0.078)
CR lag 0.113 *** 0.041 − 0.216 *** 0.151 *** 0.070 − 0.028
(0.035) (0.032) (0.051) (0.041) (0.044) (0.050)
Logarithm (Age lag) 0.317 *** − 0.038 0.223 ** 0.145 − 0.113 0.042
(0.089) (0.114) (0.093) (0.095) (0.116) (0.098)
Legal Form − 0.250 *** − 0.075 − 0.036 − 0.317 *** − 0.014 − 0.012
(0.077) (0.100) (0.082) (0.082) (0.103) (0.087)
Industry − 0.472 *** − 0.601 *** − 0.276 *** − 0.516 *** − 0.625 *** − 0.301 ***
(0.103) (0.125) (0.103) (0.106) (0.131) (0.109)
Trade 0.211 ** 0.066 − 0.014 0.256 ** 0.022 − 0.042
(0.105) (0.130) (0.113) (0.109) (0.136) (0.118)
Transport − 0.933 *** − 0.800 *** − 0.544 *** − 0.905 *** − 0.794 *** − 0.483 **
(0.192) (0.248) (0.188) (0.204) (0.268) (0.205)
Restaurant 0.418 *** 0.501 *** 0.336 ** 0.417 *** 0.508 ** 0.355 **
(0.140) (0.191) (0.160) (0.157) (0.205) (0.175)
Logarithm (Invest) 0.074 0.417 0.492 − 0.341 0.230 0.302
(0.325) (0.479) (0.376) (0.425) (0.515) (0.413)
Intercept 1.161 − 4.281 *** − 2.364 *** 2.380 ** − 3.088 *** − 1.321
(0.777) (1.100) (0.859) (0.942) (1.192) (0.929)
Observations 3488 2899
Wald chi-square 745.59 *** 616.20 ***
Log pseudolikelihood − 3121.4 − 2912.4
Maximum VIF 1.57 1.58
Prediction rate (%) 66.03% 59.68%

Notes: Coefficients were estimated using a multinomial probit regression with robust standard errors. The dependent variable is a dummy variable that is equal to 0 if the firm was
subject to an amicable liquidation, 1 to a judicial liquidation, 2 to a sauvegarde procedure and 3 to a redressement judiciaire procedure. The group of firms that were subject to a
judicial liquidation is the comparison group. The prediction rate (%) represents the percentage of correctly predicted observations. Delta-method standard errors are included in
the brackets. * implies a significant coefficient at the 10% level, ** at 5% level, and *** at the 1% level. Detailed definitions of the variables are presented in Table 1.

Appendix B

See Table 6.

13
N. Stef and J.-J. Bissieux International Review of Law & Economics 70 (2022) 106063

Table 6
Multinomial probit approach. Alternative accounting variables.

Lag = 1 year Lag = 2 years

Variable Amicable Liquidation (1) Sauvegarde (2) Redressement (3) Amicable Liquidation (4) Sauvegarde (5) Redressement (6)

First Lockdown − 0.367 ** − 0.038 − 0.077 − 0.281 0.267 − 0.143

(0.179) (0.230) (0.230) (0.190) (0.233) (0.221)
First Post-Lockdown − 0.642 *** − 0.578 *** − 0.632 *** − 0.590 *** − 0.452 *** − 0.604 ***
(0.098) (0.149) (0.130) (0.106) (0.153) (0.125)
Second Lockdown − 0.276 * 0.240 0.010 − 0.106 0.453 ** 0.044
(0.153) (0.194) (0.183) (0.163) (0.199) (0.181)
Second Post-Lockdown − 0.640 *** − 0.151 − 0.223 − 0.604 *** − 0.381 ** − 0.419 ***
(0.123) (0.171) (0.148) (0.130) (0.191) (0.148)
ROA lag − 0.006 − 0.042 * − 0.026 0.087 ** − 0.063 − 0.062
(0.023) (0.022) (0.019) (0.042) (0.041) (0.038)
WC/TA lag 0.032 ** − 0.013 * − 0.001 0.073 *** − 0.034 ** − 0.019
(0.014) (0.007) (0.006) (0.024) (0.014) (0.013)
Logarithm (Equity lag) 0.693 *** 1.043 *** 0.776 *** 0.696 *** 1.052 *** 0.755 ***
(0.066) (0.095) (0.076) (0.067) (0.105) (0.074)
QR lag − 0.159 *** − 0.069 ** − 0.323 *** − 0.260 *** − 0.077 ** − 0.194 ***
(0.047) (0.030) (0.064) (0.031) (0.039) (0.060)
Logarithm (Age lag) − 0.402 *** 0.030 0.039 − 0.350 *** − 0.041 − 0.033
(0.089) (0.124) (0.109) (0.096) (0.135) (0.108)
Legal Form − 0.547 *** 0.040 − 0.023 − 0.554 *** 0.024 − 0.026
(0.081) (0.110) (0.099) (0.088) (0.114) (0.097)
Industry − 0.820 *** − 0.616 *** − 0.235 * − 0.809 *** − 0.667 *** − 0.252 **
(0.105) (0.145) (0.131) (0.111) (0.149) (0.125)
Trade 0.116 − 0.075 0.019 0.104 − 0.107 − 0.072
(0.109) (0.151) (0.140) (0.115) (0.155) (0.136)
Transport − 1.218 *** − 1.082 *** − 0.711 ** − 1.156 *** − 1.347 *** − 0.759 ***
(0.207) (0.329) (0.281) (0.212) (0.346) (0.257)
Restaurant 0.548 *** 0.332 0.375 * 0.526 *** 0.183 0.192
(0.165) (0.246) (0.216) (0.184) (0.275) (0.228)
Logarithm (Invest) 0.382 0.564 0.355 − 0.120 − 0.220 0.238
(0.350) (0.633) (0.522) (0.356) (0.630) (0.484)
Intercept − 1.035 − 4.468 *** − 2.830 ** 0.072 − 2.612 * − 2.300 **
(0.771) (1.413) (1.162) (0.790) (1.426) (1.066)
Observations 2487 2237
Wald chi-square 513.25 *** 490.83 ***
Log pseudolikelihood − 2396.2 − 2295.0
Maximum VIF 1.60 1.60
Prediction rate (%) 60.07% 57.58%

Notes: Coefficients were estimated using a multinomial probit regression with robust standard errors. The dependent variable is a dummy variable that is equal to 0 if the firm was
subject to an amicable liquidation, 1 to a judicial liquidation, 2 to a sauvegarde procedure and 3 to a redressement judiciaire procedure. The group of firms that were subject to a
judicial liquidation is the comparison group. The prediction rate (%) represents the percentage of correctly predicted observations. Delta-method standard errors are included in
the brackets. * implies a significant coefficient at the 10% level, ** at 5% level, and *** at the 1% level. Detailed definitions of the variables are presented in Table 1.

Appendix C

See Table 7.

14
N. Stef and J.-J. Bissieux International Review of Law & Economics 70 (2022) 106063

Table 7
French bankruptcy procedures and pandemic periods. Regional effects.

Lag = 1 year Lag = 2 years

Variable Amicable Judicial Sauvegarde (3) Redressement (4) Amicable Judicial Sauvegarde (7) Redressement
Liquidation (1) Liquidation (2) Liquidation (5) Liquidation (6) (8)

First Lockdown − 0.022 0.046 − 0.000 − 0.023 − 0.068 0.087 * 0.011 − 0.031
(0.046) (0.042) (0.015) (0.020) (0.046) (0.046) (0.019) (0.025)
First Post-Lockdown − 0.091 0.163 *** − 0.011 − 0.060 *** − 0.093 *** 0.182 *** − 0.013 − 0.075 ***
(0.027) (0.025) (0.008) (0.011) (0.025) (0.025) (0.009) (0.013)
Second Lockdown − 0.054 0.023 0.048 ** − 0.016 − 0.037 − 0.005 0.053 *** − 0.010
(0.039) (0.035) (0.019) (0.018) (0.041) (0.040) (0.013) (0.023)
Second Post-Lockdown − 0.102 *** 0.124 *** − 0.001 − 0.022 − 0.099 *** 0.145 *** − 0.006 − 0.040 **
(0.033) (0.031) (0.011) (0.014) (0.030) (0.031) (0.012) (0.017)
EBITDA/TA lag 0.016 − 0.002 − 0.002 − 0.012 * 0.027 *** − 0.010 − 0.005 *** − 0.012 ***
(0.011) (0.010) (0.002) (0.007) (0.010) (0.011) (0.001) (0.003)
LEV lag 0.067 *** − 0.056 *** − 0.005 *** − 0.007 ** 0.049 *** − 0.025 *** − 0.007 *** − 0.018 ***
(0.015) (0.014) (0.001) (0.002) (0.009) (0.009) (0.002) (0.003)
Logarithm (TA lag) − 0.296 *** 0.128 *** 0.084 *** 0.085 *** − 0.255 *** 0.111 *** 0.074 *** 0.070 ***
(0.027) (0.026) (0.009) (0.012) (0.026) (0.023) (0.009) (0.013)
CR lag 0.048 *** − 0.012 0.002 − 0.037 *** 0.045 *** − 0.029 ** 0.001 − 0.017 **
(0.010) (0.009) (0.002) (0.006) (0.010) (0.012) (0.003) (0.007)
Logarithm (Age lag) 0.081 *** − 0.077 *** − 0.016 * 0.012 0.039 − 0.027 − 0.014 0.002
(0.025) (0.022) (0.009) (0.012) (0.026) (0.025) (0.009) (0.015)
Legal Form − 0.074 *** 0.053 *** 0.005 0.016 − 0.095 *** 0.059 *** 0.012 0.024 *
(0.022) (0.020) (0.007) (0.011) (0.022) (0.021) (0.008) (0.014)
Industry − 0.107 *** 0.141 *** − 0.028 *** − 0.005 − 0.109 *** 0.154 *** − 0.035 *** − 0.011
(0.028) (0.025) (0.008) (0.013) (0.028) (0.028) (0.009) (0.016)
Trade 0.063 ** − 0.037 − 0.004 − 0.021 0.083 *** − 0.041 − 0.009 − 0.033 **
(0.029) (0.027) (0.009) (0.013) (0.030) (0.029) (0.010) (0.017)
Transport − 0.221 *** 0.258 *** − 0.022 ** − 0.015 − 0.193 *** 0.241 *** − 0.028 ** − 0.020
(0.048) (0.046) (0.011) (0.022) (0.044) (0.047) (0.013) (0.029)
Restaurant 0.073 * − 0.108 *** 0.019 0.016 0.070 * − 0.122 *** 0.024 0.028
(0.038) (0.033) (0.017) (0.021) (0.042) (0.038) (0.020) (0.029)
Logarithm (Invest) − 0.001 − 0.428 * 0.108 0.321 *** − 0.704 0.018 0.155 0.530
(0.270) (0.234) (0.071) (0.102) (0.419) (0.343) (0.088) (0.143)
Observations 3488 2899
Wald chi-square 827.67 *** 659.26 ***
Log pseudolikelihood − 3078.1 − 2869.3
Maximum VIF 5.73 5.81
Prediction rate (%) 66.15% 60.02%
Regional effects Yes Yes

Notes: Marginal effects at the mean were estimated using a multinomial probit regression with robust standard errors and regional effects. The dependent variable is a dummy
variable that is equal to 0 if the firm was subject to an amicable liquidation, 1 to a judicial liquidation, 2 to a sauvegarde procedure and 3 to a redressement judiciaire procedure. The
prediction rate (%) represents the percentage of correctly predicted observations. Delta-method standard errors are included in the brackets. * implies a significant coefficient at
the 10% level, ** at 5% level, and *** at the 1% level. Detailed definitions of the variables are presented in Table 1.

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