Hungary's bankruptcy experience, 1992-93

Policymakers working on enterprise restructuring should take a close look at Hungary's experience with bankruptcy reform since 1992. This article provides detailed data on a randomly selected stratified sample of actual cases filed in the first two years after the enactment of the law. These data are supplemented with information obtained from interviews with judges, liquidators, and firms involved in the bankruptcy process to give an overall picture of the process in the first two years of its implementation. The bankruptcy process in Hungary has indisputably spurred institution building in the courts, the trustee profession, and the banks. It may also have succeeded broadly in separating viable from unviable firms. It did little, however, to further either deep restructuring or the exit of ailing firms. The changes in incentives and institutions that ave needed to make bankruptcy work in transition economies invariably take time. Hungary's initiative, albeit imperfect, was a bold start toward reform.