An empirical study of micro- and small-enterprise bankruptcy protection under the COVID-19 pandemic: New evidence from China

Abstract

Micro- and small-enterprises (MSEs) serve as a strong foundation for sustainable and stable economic and social development in countries worldwide. However, they are highly susceptible to bankruptcy crises, a phenomenon that has been significantly amplified by the COVID-19 pandemic. The article presents an empirical investigation of the application of the bankruptcy system to MSEs, using data on MSE bankruptcies published by the Sichuan courts in China in 2020 during the COVID-19 pandemic as evidence. The article reveals that MSEs face a triple dilemma when applying bankruptcy procedures. Firstly, the legal system for bankruptcy is unsound. Secondly, the institutional mechanism for bankruptcy is imperfect. And thirdly, the social environment surrounding bankruptcy is not conducive. The article presents a novel approach to address bankruptcy issues by suggesting the implementation of streamlined bankruptcy procedures, a reorganization system for small and micro-enterprises and a personal bankruptcy system. Additionally, it proposes enhancing the institutional framework for the selection, evaluation and oversight of bankruptcy judges and administrators, as well as the establishment of third-party institutions. Furthermore, it advocates for a modernized understanding of bankruptcy, the provision of pre-bankruptcy services and the creation of a bankruptcy protection system. The article presents a unique sample of international comparative studies on MSEs and proposes a new approach to examining bankruptcy protection for MSEs in China.