Novak, Branko and Sajter, Domagoj (2007): CAUSES OF BANKRUPTCY IN EUROPE AND CROATIA. Forthcoming in:
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Bankruptcy is an interesting object of research, being habitually perceived as a shocking and scandalous event, tarnishing management reputation, stigmatizing its owners, and regularly leading to a dishonourable death of the company, leaving outstanding debts in legacy. Its interdisciplinary character makes it even more challenging and extends the reasons for researching it in depth. Apart from these motives, recently a number of researchers significantly contributed to this field, and some of them will be presented in this paper.
On its way to becoming a member of the EU, the Croatian economy (and society in general) extensively compares its characteristics with the existing members. Since Croatian bankruptcy law is for the most part transferred from the corresponding German Insolvenzordnung (Insolvency law), German experiences in this field are especially interesting for Croatian bankruptcy researchers. Even though being a part of the EU, the United Kingdom’s Anglo-Saxon legislative theory and practice is relatively different from those of mainland Europe, therefore making it attractive for comparison.
This triangle of country-specific bankruptcy features, where Germany and the United Kingdom embody rich diversity of the European Union, and Croatia symbolizes new member states (although not yet being a constituent) with their particular transition traits, is fit into Ooghe and Waeyaert’s (2004) universal, conceptual failure model.
Thus, first presented will be a general bankruptcy cause model. Ooghe and De Prijcker (2006) presented four main types of failure processes. Their findings of bankruptcy causes are based on a case study of bankrupt Belgian companies but can be generalized as universal bankruptcy causes. They are examined in the second section. According to this model country-specific (the United Kingdom, Germany and Croatia) insolvency causes will be studied.
Euler Hermes Kreditversicherung and the Center for Insolvency and Reorganization at the University of Mannheim published in November 2006 a comprehensive study of bankruptcy causes. This research and its results are exhibited in the third section, as well as an overview of the less recent Wieselhuber & Partner (2003) study of the insolvency causes and success factors of reorganization from the insolvency.
At the same time the Euler Hermes and the Center for Insolvency and Reorganization study was being finalized, unacquainted with it, a somewhat similar research was being conducted in Croatia. Our research of bankruptcy causes in Croatia is presented in the fourth section.
Finally, the concluding remarks will summarize the main findings of this paper.