Finance Seminar: Paul Docherty

Do reorganization-focused bankruptcy regimes improve loan recovery rates?

 Following evidence that reorganizations improve post-default outcomes for creditors (Djankov et al., 2008), many countries have begun to adopt a more debtor-friendly bankruptcy regime that mirrors Chapter 11 bankruptcy in the United States. We examine the efficacy of this new regulatory paradigm by examining how differences in the legal environment affect loan recovery rates using a novel database that provides non-retail loan defaults across 31 countries. Debtor-friendly bankruptcy laws do, on average, improve recovery rates; however, this relationship depends on the strength of legal enforcement. Legal enforcement is particularly important in periods when there is an increased risk that debtor-friendly laws will be exploited via expropriation. We confirm our results by examining the introduction of more debtor-friendly bankruptcy laws across eight countries and show that this exogenous shock improved recovery rates, although the magnitude of this increase was significantly larger in the presence of strong legal enforcement. Our results suggest that it is more than just the ‘law on the books’ that matters for creditors’ outcomes and therefore legislators need to design bankruptcy laws that are consistent with other aspects of the legal environment.

Dr Paul Docherty

Paul is an academic in finance who joined Monash in July 2017 after ten years at the University of Newcastle. His main research interest is in empirical asset pricing, where he has published more than 25 peer-reviewed articles in journals such as the Journal of Financial and Quantitative Analysis, Decisions Support Systems, the Journal of Fixed Income and the Pacific-Basin Finance Journal. He has supervised eight PhDs and seven Honours students to completion. Paul's teaching tends to align with this research interest. He has won several awards for teaching, including the NUPSA award for 'Teacher of the Year' and a Vice-Chancellor's citation for teaching excellence at the University of Newcastle.

Paul remains engaged with external stakeholders while undertaking his academic responsibilities and has undertaken extensive consultation activities across the funds management industry. During his time at the University of Newcastle, he was responsible for external engagement activities in his role as the Acting Assistant Dean (External Engagment). Paul has taught and held various visiting positions around the world, including in the UK, Singapore, Hong Kong and China.