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The Real Effects of Bankruptcy Forum Shopping

Author

Listed:
  • Samuel Antill
  • Aymeric Bellon

Abstract

Many non-Delaware firms strategically file for bankruptcy in Delaware. Should this "forum shopping" be allowed? This question has motivated nine proposed congressional bills over decades of policy debate. Using a novel natural experiment and Census-Bureau microdata, we inform this debate. Comparing similar firms within a Delaware-adjacent state, we show that proximity to Delaware predicts forum shopping. Instrumenting with proximity, we find that forum shopping causally: (i) prevents closures and liquidations, (ii) shortens bankruptcies, (iii) boosts creditor recovery, and (iv) increases post-bankruptcy employment by 24.8%. Proximity to Delaware is uncorrelated with growth for not-yet-bankrupt or never-bankrupt firms, validating the exclusion restriction.

Suggested Citation

  • Samuel Antill & Aymeric Bellon, 2026. "The Real Effects of Bankruptcy Forum Shopping," Working Papers 26-29, Center for Economic Studies, U.S. Census Bureau.
    • Handle: RePEc:cen:wpaper:26-29
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    File URL: https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-29.pdf
    File Function: First version, 2026
    Download Restriction: no
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    Keywords

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    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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