Insolvent trading and voluntary administration in Australia: Economic winners and losers?

Brotchie, James and Morrison, David (2017) Insolvent trading and voluntary administration in Australia: Economic winners and losers?. Accounting and Finance, . doi:10.1111/acfi.12319


Author Brotchie, James
Morrison, David
Title Insolvent trading and voluntary administration in Australia: Economic winners and losers?
Journal name Accounting and Finance   Check publisher's open access policy
ISSN 1467-629X
0810-5391
Publication date 2017-12-14
Year available 2017
Sub-type Article (original research)
DOI 10.1111/acfi.12319
Open Access Status Not yet assessed
Total pages 26
Place of publication Richmond, VIC Australia
Publisher Wiley-Blackwell Publishing Asia
Language eng
Subject 1402 Accounting
2003 Finance
2001 Economics, Econometrics and Finance (miscellaneous)
Abstract Australian directors who incur debts while their companies are insolvent can be pursued by the corporate regulator for compensation when their companies fail. Under the Australian insolvent trading laws, directors no longer experience 'true' limited liability, and as expected, they adjust their behaviour as a result. Identifying director's rational behaviour in an insolvent trading world is difficult as there are no formal economic models of director decision-making under Australian current corporate law. In this paper, we develop such a model primarily for private companies. We incorporate the threat of insolvent trading as well as director's tactical use of voluntary administration to avoid insolvent trading litigation. We show that neither a combination of insolvent trading or voluntary administration can simultaneously ensure creditors-best outcomes, eliminate insolvent trading and reduce director underinvestment.
Keyword Bankruptcy
Directors
Insolvent trading
Q-Index Code C1
Q-Index Status Provisional Code
Institutional Status UQ

Document type: Journal Article
Sub-type: Article (original research)
Collections: HERDC Pre-Audit
TC Beirne School of Law Publications
 
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Created: Sun, 24 Dec 2017, 07:52:01 EST