Industrial spatial dynamics, financial health and bankruptcy: evidence from Italian manufacturing industry

Considering the Italian manufacturing industry (more than 100,000 enterprises) and a panel of 6 years (from 2005 to 2010), we investigate the relation between the time necessary to define a bankruptcy case and the concentration of enterprises with good financial health. In particular, recalling the seminal work of Modigliani and Miller (Am Econ Rev 48(3):261-297, 1958), we test the hypothesis that the enforcement of creditors' rights can affect managers' strategies, and the related risks. According to results, judicial delay can affect the industrial spatial dynamics and regional development, confirming the key role of judiciary. Indeed, we identify a statistically significant relation between the time necessary to enforce creditors' rights and the concentration of healthy enterprises for several manufacturing industrial sectors. The policy implications of this work concern the opportunity of reforming the national bankruptcy law and courts' organization to support the national economic growth.