Spain has the one of the world’s lowest business bankruptcy rates .  This seminar will propose a hypothesis to

explain this fact, which hinges on the idea that the unattractiveness of

bankruptcy procedures leads Spanish firms to reduce the risk of bankruptcy.

It will be argued that the Spanish corporate bankruptcy law grants low creditor

protection relative to an alternative insolvency institution, the mortgage system,

without achieving sizeable ex-post efficiency gains, and it is also very

unattractive for company managers in terms of expected liabilities. The Spanish

personal insolvency law, widely used for small companies in other countries, is

too severe towards the individual debtor. This institutional framework may

have negative repercussions on innovation, business returns and productivity.

This hypothesis is compatible with stylized features of firms’

capital and asset structures and profitability. The potential policy implications of this will also be discussed.