Should We Abolish Chapter 11? Evidence from Canada
Chapter 11 has been severely criticized over the last decade. Some American jurists arguing in favor of revising Chapter 11 have raised the possibility that the Canadian reorganization system might be a good alternative. This article examines data on firms undergoing reorganization under the Canadian bankruptcy system and argues that there are fruitful lessons to be learned from the Canadian experience with court-supervised reorganization. Canadian reorganization plans have very high rates of acceptance, confirmation, and consummation. Firms in Canada are almost eight times more likely to survive reorganization than are firms in Chapter 11. Further, small firms are just as likely as large firms are to emerge from reorganization in Canada, contrary to experience in the United States. The data also show that Canadian reorganization procedure offers a very rapid solution to financial distress and that creditors gain, in expected value terms, from reorganization over liquidation. We use our analysis of the relative performance of the two systems to suggest some avenues for reform of Chapter 11. Copyright 1999 by the University of Chicago.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Aghion, Philippe & Hart, Oliver & Moore, John, 1992.
"The Economics of Bankruptcy Reform,"
Journal of Law, Economics and Organization,
Oxford University Press, vol. 8(3), pages 523-46, October.
- Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," NBER Working Papers 4097, National Bureau of Economic Research, Inc.
- Aghion, P. & Hart, O. & Moore, J., 1992. "The Economics of Bankruptcy Reform," Working papers 92-11, Massachusetts Institute of Technology (MIT), Department of Economics.
- Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," CEP Discussion Papers dp0093, Centre for Economic Performance, LSE.
- Weiss, Lawrence A., 1990. "Bankruptcy resolution: Direct costs and violation of priority of claims," Journal of Financial Economics, Elsevier, vol. 27(2), pages 285-314, October.
- White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
- Warner, Jerold B, 1977. "Bankruptcy Costs: Some Evidence," Journal of Finance, American Finance Association, vol. 32(2), pages 337-47, May.
- Jocelyn Martel, 1995. "Signaling in Financial Reorganization: Theory and Evidence from Canada," CIRANO Working Papers 95s-34, CIRANO.
- 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, vol. 45(5), pages 1457-69, December.
- Jocelyn Martel, 1994. "Commercial Bankruptcy and Financial Reorganization in Canada," CIRANO Papers 94c-02, CIRANO.
- 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, vol. 10(2), pages 268-95, October.
- Franks, Julian R. & Torous, Walter N., 1994. "A comparison of financial recontracting in distressed exchanges and chapter 11 reorganizations," Journal of Financial Economics, Elsevier, vol. 35(3), pages 349-370, June.
- Timothy C. G. Fisher & Jocelyn Martel, 1994. "Will the Bankruptcy Reform Work? An Empirical Analysis of Financial Reorganization in Canada," Canadian Public Policy, University of Toronto Press, vol. 20(3), pages 265-277, September.
- Daigle, Katherine H & Maloney, Michael T, 1994. "Residual Claims in Bankruptcy: An Agency Theory Explanation," Journal of Law and Economics, University of Chicago Press, vol. 37(1), pages 157-92, April.
- Jocelyn Martel, 1996. "Solutions au stress financier : Un survol de la littérature," CIRANO Working Papers 96s-03, CIRANO.
- Eisenberg, Theodore & Tagashira, Shoichi, 1994. "Should We Abolish Chapter 11? The Evidence from Japan," The Journal of Legal Studies, University of Chicago Press, vol. 23(1), pages 111-57, January.
- Jocelyn Martel, 1994. "More on the Impact of Bankruptcy Reform in Canada," CIRANO Working Papers 94s-17, CIRANO.
- White, Michelle J, 1983. " Bankruptcy Costs and the New Bankruptcy Code," Journal of Finance, American Finance Association, vol. 38(2), pages 477-88, May.
When requesting a correction, please mention this item's handle: RePEc:ucp:jlstud:v:28:y:1999:i:1:p:233-57. 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: (Journals Division)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.