| Abstract: | Russian firms are drowning in debt. Managers are increasingly turning to the courts for help. Drawing on a database of 100 non-payments cases decided by three courts in 2000, the article explores the parameters of this litigation and the motivations for filing lawsuits. The analysis shows that the docket is dominated by small-scale disputes between trading partners with short shared histories, suggesting that those who have long-term, trust-based relationships avoid the courts. Along with fear of disrupting ongoing relationships, the disinclination to use the courts is also motivated by a reluctance to open up transactions to state scrutiny. By contrast, the petty disputes that are brought to court tend to be simple and, therefore, managers are willing to risk exposure to the state. Indeed, in a world in which firms manipulate their financial records to create the impression of no income in order to avoid taxes (often putting bogus debts on the books), some of these managers bring cases even when there is little chance of recovering the debt because the decision provides convincing evidence to the tax authorities that the debt is bona fide. |
