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Claimholder Incentive Conflicts in Reorganization: The Role of Bankruptcy Law

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Author Info
Brown, David T
Abstract

When a firm is financial distress, in most cases a set of mutually advantageous reorganization plans exist. This article shows that the bankruptcy code, by providing rules governing the negotiation process, yields a unique solution to the reorganization process. In addition, the structure imposed by the code mitigates the holdout problem created by the individual claimant's divergent incentives. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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File URL: http://www.jstor.org/fcgi-bin/jstor/listjournal.fcg/08939454
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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 2 (1989)
Issue (Month): 1 ()
Pages: 109-23
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:2:y:1989:i:1:p:109-23

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  1. Oscar Couwenberg & Abe Jong, 2008. "Costs and recovery rates in the Dutch liquidation-based bankruptcy system," European Journal of Law and Economics, Springer, vol. 26(2), pages 105-127, October. [Downloadable!] (restricted)
  2. Kurtis Swope, Pamela Schmitt, John Cadigan and Robert Shupp, 2008. "An Experimental Study of the Holdout Problem in a Multilateral Bargaining Game," Departmental Working Papers 21, United States Naval Academy Department of Economics. [Downloadable!]
  3. Stanley D. Longhofer & Stephen R. Peters, 2000. "Protection for whom? creditor conflicts in bankruptcy," Working Paper 9909R, Federal Reserve Bank of Cleveland. [Downloadable!]
  4. Ying Yan, 1997. "Credit rationing, bankruptcy cost, and the optimal debt contract for small business," Working Paper 9702, Federal Reserve Bank of Cleveland. [Downloadable!]
  5. Eckbo, B Espen & Thorburn, Karin S, 2005. "Bidding in Mandatory Bankruptcy Auctions: Theory and Evidence," CEPR Discussion Papers 4873, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  6. Gary Cook & Keith Pond, 2006. "Explaining the choice between alternative insolvency regimes for troubled companies in the UK and Sweden," European Journal of Law and Economics, Springer, vol. 22(1), pages 21-47, July. [Downloadable!] (restricted)
  7. Adriana Breccia, 2004. "Formal Bankruptcy: Strategic Debt Service with Senior and Junior Creditors," Birkbeck Working Papers in Economics and Finance 0411, Birkbeck, Department of Economics, Mathematics & Statistics. [Downloadable!]
  8. Araújo, Aloísio Pessoa de & Funchal, Bruno, 2005. "Past and Future of the Bankruptcy Law in Brazil and Latin America," Economics Working Papers (Ensaios Economicos da EPGE) 599, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
  9. Hvide, Hans K., 2005. "Optimal contracts under imperfect enforcement revisited," Discussion Papers 2005/4, Department of Finance and Management Science, Norwegian School of Economics and Business Administration. [Downloadable!]
  10. Michelle J. White, 2005. "Economic Analysis of Corporate and Personal Bankruptcy Law," NBER Working Papers 11536, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  11. Bebchuk, Lucian Arye, 2001. "Ex Ante Costs of Violating Absolute Priority in Bankruptcy," CEPR Discussion Papers 2914, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  12. Stanley D. Longhofer, 1997. "Absolute priority rule violations, credit rationing, and efficiency," Working Paper 9710, Federal Reserve Bank of Cleveland. [Downloadable!]
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