A study of the determinants of insolvency processes outcomes: the case of corporate reorganization in Colombia

Corporate reorganization, being one of the most accessed bankruptcy procedures and with greater potential consequences for the stability and growth of the productive fabric, is placed in the focus of study of this thesis to be unraveled from the scope of the prediction of results in the context of the current Corporate Insolvency Regime in Colombia (Act 1116 of 2006). This interest is reinforced by the research gap detected in the literature on its determinants, especially when the analysis is extended to countries and legal frameworks other than the United States, Great Britain and the European Union. Indeed, only a handful of studies have analyzed the prediction of reorganization outcomes by focusing on the exploration of financial, economic and, to a lesser extent, firm characteristics, and the procedure itself (Camacho-Miñano et al., 2013; Antill and Grenadier, 2019; Cepec and Grajzl, 2021a), but in no case has the lens been set on Latin America. The thesis is illustrated in three chapters and each of these is developed aiming at a specific research objective according to the gap detected in the literature. The first chapter deals with the predictors of the failure of reorganization processes in Colombia and provides an overview of the implementation of Act 1116 of 2006 with respect to this insolvency procedure. The second chapter of the thesis proceeds with the prediction of insolvency outcomes by proposing a model for forecasting the success/failure of reorganization. The model is validated in two different periods. The first, in 2019, was characterized by stability, and the second, in 2020, was characterized by uncertainty generated by the COVID-19 pandemic. The findings and contributions of the first two chapters of the thesis laid the foundations for new research focused on aspects barely explored in the insolvency literature. The development of Chapter 3 responds to the necessity to understand the role of the insolvency practitioner in the outcome of corporate reorganization and thus lay the foundations for a discussion that, in the Latin American context and specifically in Colombia, is practically nonexistent considering the theoretical and methodological approach of the research. The chapter's contribution to the literature highlights a priori the characterization of the figure of the insolvency practitioner, exploiting the legal framework of a Latin American country that presents sociocultural differences compared to most other OECD members, but at the same time shows similarities between its insolvency regime and the bankruptcy codes of some of the group's economic powers. This thesis lays the foundations of a conceptual framework around predictors, predictive models, and the role of the insolvency practitioner in the outcomes of corporate reorganization from a pioneering context of analysis in the face of previous evidence in the literature.