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Chapter 11

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  • Lucian Arye Bebchuk

Abstract

This essay surveys the literature on Chapter 11. I start by discussing the objectives by which the performance of corporate reorganization rules is to be judged and then consider the fundamental problem of valuation that arises in corporate reorganization. I next turn to examine the performance of the prevailing bargaining-based approach to reorganization, both in terms of its effect on total reorganization value and in terms of its effect on the division of this value. Finally, I examine the two alternative approaches that have been put forward to the approach of existing rules -- that of auctioning the reorganized company's asset (put forward by Baird (1986) and Jensen (1991)) and that of using options to reorganize the company's ownership (put forward by Bebchuk (1988)).

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6473.

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Date of creation: Mar 1998
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Publication status: published as The New Palgrave Dictionary of Economics and the Law (1998), pp. 219-224
Handle: RePEc:nbr:nberwo:6473

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References

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  1. Robert Gertner & David Scharfstein, 1991. "A Theory of Workouts and the Effects of Reorganization Law," NBER Technical Working Papers 0103, National Bureau of Economic Research, Inc.
  2. Michael C. Jensen, 1991. "Corporate Control And The Politics Of Finance," Journal of Applied Corporate Finance, Morgan Stanley, Morgan Stanley, vol. 4(2), pages 13-34.
  3. Lucian Arye Bebchuk & Howard F. Chang, 1991. "Bargaining and the Division of Value in Corporate Reorganization," NBER Technical Working Papers 0097, National Bureau of Economic Research, Inc.
  4. Aghion, Philippe & Hart, Oliver & Moore, John, 1992. "The Economics of Bankruptcy Reform," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 8(3), pages 523-46, October.
  5. Eberhart, Allan C & Moore, William T & Roenfeldt, Rodney L, 1990. " Security Pricing and Deviations from the Absolute Priority Rule in Bankruptcy Proceedings," Journal of Finance, American Finance Association, American Finance Association, vol. 45(5), pages 1457-69, December.
  6. David M. Cutler & Lawrence H. Summers, 1988. "The Costs of Conflict Resolution and Financial Distress: Evidence from the Texaco-Pennzoil Litigation," RAND Journal of Economics, The RAND Corporation, vol. 19(2), pages 157-172, Summer.
  7. Weiss, Lawrence A., 1990. "Bankruptcy resolution: Direct costs and violation of priority of claims," Journal of Financial Economics, Elsevier, Elsevier, vol. 27(2), pages 285-314, October.
  8. White, Michelle J, 1994. "Corporate Bankruptcy as a Filtering Device: Chapter 11 Reorganizations and Out-of-Court Debt Restructurings," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 10(2), pages 268-95, October.
  9. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, American Finance Association, vol. 47(4), pages 1343-66, September.
  10. Baird, Douglas G., 1991. "The initiation problem in bankruptcy," International Review of Law and Economics, Elsevier, Elsevier, vol. 11(2), pages 223-232, September.
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Citations

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Cited by:
  1. Dan Galai & Alon Raviv & Zvi Wiener, 2003. "Liquidation Triggers and the Valuation of Equity and Debt," Finance, EconWPA 0305002, EconWPA.
  2. Lucian Arye Bebchuk, 2001. "Ex Ante Costs of Violating Absolute Priority in Bankruptcy," NBER Working Papers 8388, National Bureau of Economic Research, Inc.
  3. Buttwill, Klas & Wihlborg, Clas, 2005. "The Efficiency of the Bankruptcy Process. An International Comparison," Ratio Working Papers, The Ratio Institute 65, The Ratio Institute.
  4. Michelle J. White, 2005. "Economic Analysis of Corporate and Personal Bankruptcy Law," NBER Working Papers 11536, National Bureau of Economic Research, Inc.
  5. Ralph P. Heinrich, 1999. "A Model of Corporate Governance as a System," Kiel Working Papers 931, Kiel Institute for the World Economy.
  6. Bigus, Jochen, 2002. "Bankruptcy law, asset substitution problem, and creditor conflicts," International Review of Law and Economics, Elsevier, Elsevier, vol. 22(2), pages 109-132, August.
  7. Pasadilla, Gloria O., 2005. "Special Purpose Vehicles and Insolvency Reforms in the Philippines," Discussion Papers DP 2005-06, Philippine Institute for Development Studies.

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