Corporate Bankruptcy as a Filtering Device: Chapter 11 Reorganizations and Out-of-Court Debt Restructurings
This article uses a game theoretic model of Chapter 11 bankruptcy and out-of-court debt restructuring to evaluate the economic efficiency of U.S. bankruptcy procedures. The model assumes that there are two types of failing firms: economically inefficient firms that should liquidate and economically efficient firms that should be saved. From an efficiency standpoint, the goal of corporate bankruptcy procedures is to liquidate the former under Chapter 7 and save the latter by reorganization under Chapter 11-that is, to filter out inefficient firms. However, it is difficult to identify which failing firms are inefficient, so bankruptcy procedures may operate with error. The model shows that a pooling equilibrium may occur in which both efficient and inefficient failing firms reorganize under Chapter 11. Adding restructuring as a bankruptcy alternative appears to make things worse, since the transactions cost savings in restructuring compared to reorganization makes the inefficient equilibrium more likely to occur. Copyright 1994 by Oxford University Press.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 10 (1994)
Issue (Month): 2 (October)
|Contact details of provider:|| Postal: |
Fax: 01865 267 985
Web page: http://jleo.oupjournals.org/
|Order Information:||Web: http://www.oup.co.uk/journals|
When requesting a correction, please mention this item's handle: RePEc:oup:jleorg:v:10:y:1994:i:2:p:268-95. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Oxford University Press)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.