Paolo Di Martino

Approaching Disaster: Personal Bankruptcy Legislation in Italy and England, c.1880-1939

Recent developments in economic theory have emphasised the relevance of the legal system in explaining why growth rates differ between national economies. Specifically, laws and enforcement instruments generate economic growth via the provision of a sound environment for financial intermediation and business activity. Within this theoretical framework, the economic impact of bankruptcy, both personal and corporate, is one of the most intensively studied subjects. Laws and procedures dealing with personal and corporate insolvency can be considered fundamental parts of the legal structure of market economies. In a perfect, efficient, and highly theoretical world, inefficient businesses are eliminated from the market immediately, without any cost. In the real world, however, proceedings can be long and very costly for debtors, creditors, and the entire economic system. The general aim of efficient laws and procedures is to minimise these costs. Solutions to this problem varied very much between the Anglo-Saxon world and Continental Europe. Generally speaking, in England, and even more in the United States, bankruptcy law lost the severity inherited from the medieval tradition relatively quickly, the legislator providing more tolerant remedies to the problem of insolvency. By contrast, in Continental Europe, and particularly in Italy and France, the commercial code introduced by Napoleon in 1807 reinforced the severity and the penal character of medieval legislation. The aim of this paper is to show how the relatively stricter Italian law was less efficient than the English law in supporting the necessities of a modern economy. Regarding ex post efficiency, statistical evidence shows that English bankruptcy procedures assured higher ‘dividends’ and shorter waiting-time for creditors than in Italy. On the other hand, secondary sources, mainly contemporary literature, stressed how English law and procedures avoided the costly waste of entrepreneurial resources by giving sound debtors the possibility of a ‘second chance’. With reference to ex ante efficiency, qualitative evidence suggests English law was a more efficient regulatory device for the business community than Italian law. Furthermore, British legislation was more consistent with the aim to promote entrepreneurship and reduce ‘rent seeking’. The article is organised as follows. A definition of efficiency of bankruptcy law is outlined in section II. In section III an overview of the historical evolution of the bankruptcy laws and procedures in Italy and England is provided. In section IV statistical indications of comparative efficiency of bankruptcy procedures, in terms of dividends paid and waiting-time, are supplied. In section V a qualitative comparison of the efficiency of the two legal frameworks is presented. Section VI contains some concluding remarks.

Companies' insolvency and ‘the nature of the firm’ in Italy, 1920s–70s1

This article analyses the functioning of Italian insolvency laws and practices, in particular their role in the selection and relaunch of viable firms. The article investigates the period between the 1920s and the 1970s, and focuses on joint-stock companies. Using comparative data on the number of cases, we show that in Italy firms mainly used the procedure called fallimento (bankruptcy), consisting of the collection and subsequent liquidation of assets. Other procedures, such as deals with creditors or forms of receivership, able to give companies a further chance, were rarely used. On the basis of archival documents we maintain that this result was due to the strictness and complication of Italian procedures, as well as to their inability to select viable companies. The article also investigates the relation between the features of insolvency law and the nature of the Italian industrial system, specifically the peculiar small size and rapid turnover of joint-stock companies. We suggest that the pro-liquidation character of the insolvency law might have been one of the causes of the peculiarity of Italian industrial capitalism, even if the opposite direction of causality cannot be excluded.

Legal Institutions, Social Norms, and Entrepreneurship in Britain (C.1890–C.1939)

This article analyses the functioning of debt�?discharge procedures in England and Wales in the light of the debate on entrepreneurial failure in the years between the late Victorian age and the interwar period. Using an original dataset and an empirical approach, it is argued that social norms, cultural elements, and class considerations influenced the outcome of decisions in a way that could have reduced the incentives for economic agents to engage with productive activity. Results show that over the entire period judges paid disproportionate attention to moral issues, and often gave lighter sentences to members of the elite who went into bankruptcy for personal reasons, and tougher ones to entrepreneurs who failed because of engagement with economic activity.

Microcredit in Palestine (1995–2008): A business history perspective

This article analyses the development and functioning of the microcredit industry in Palestine in the period between its establishment as a partially autonomous political entity (1994) and the Israeli invasion of the Gaza Strip (2008). The article shows how, despite the increase in potential demand for microcredit due to the deterioration of the economic environment, the growth of the sector has been below expectation. One of the most important causes of this phenomenon has been the reluctance to lend resulting from the growing risk of late or no repayment of loans. Using original data from one microcredit institution (Arab Centre for Agricultural Development) and a quantitative approach, the article investigates the causes of this problem. Results show that the risk of late repayment was negatively correlated to the level of interest rate, to macroeconomic conditions, and to the age of the borrower while it was positively associated to the share of investment in the Gaza Strip, and to the size of loans.

Risk, Success, and Failure: Female Entrepreneurship in Late Victorian and Edwardian England

This article analyses female entrepreneurship in late Victorian and Edwardian England. Traditional views on female entrepreneurship in nineteenth‐ and twentieth‐century England point towards a decline in the number and relevance of women as business owners in comparison to the eighteenth century, and their retreat into a ‘separate sphere’ away from the world of trade and production. Recent studies, however, have deeply challenged this view, suggesting that women still played an important role as entrepreneurs during industrialization and beyond. Nevertheless, a number of questions remain unanswered with regard to the features of female entrepreneurship during these phases of British history, and issues such as scale of operation, attitude to risk, credit structure, and managerial styles are still widely debated. Using original sources, this article provides a novel view on these issues, analysing female entrepreneurship from the perspective of bankruptcy. Analysing statistics on womens bankruptcy derived from Board of Trade reports, as well as a sample of archival cases, this article argues that overall female business owners traded in ways similar to their male counterparts in terms of business size, risk‐taking, and, eventually, success.