THE ECONOMIC IMPACT OF THE DURATION OF INSOLVENCY PROCEEDINGS ON DEBTOR ASSET VALUE AND CREDITOR INTERESTS
Keywords:
insolvency; bankruptcy duration; asset value; creditor recovery; going concern; present value; Uzbekistan.Abstract
The speed with which an insolvency case is resolved is not a procedural detail but a primary determinant of how much economic value survives financial distress. This paper develops an analytical framework that links the duration of insolvency proceedings to the present value of the debtor's estate and, through it, to the recovery available to creditors. Two value-destruction channels are formalised: (i) the physical and going-concern depreciation of assets that accrues while the firm is held in legal limbo, and (ii) the discounting of delayed recoveries at the prevailing cost of capital, compounded by the continuous accrual of administrative and procedural costs. A simple decay-and-discount model shows that the marginal value destroyed by each additional period of delay equals the sum of the depreciation rate and the discount rate applied to the remaining estate, plus the flow of procedural cost.
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