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Chapter 11

  • Lucian Arye Bebchuk

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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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
Date of revision:
Publication status: published as The New Palgrave Dictionary of Economics and the Law (1998), pp. 219-224
Handle: RePEc:nbr:nberwo:6473
Note: CF LE
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  1. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," CEP Discussion Papers dp0093, Centre for Economic Performance, LSE.
  2. 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.
  3. Shleifer, Andrei & Vishny, Robert W, 1992. " Liquidation Values and Debt Capacity: A Market Equilibrium Approach," Journal of Finance, American Finance Association, vol. 47(4), pages 1343-66, September.
  4. Summers, Lawrence H. & Cutler, David, 1988. "The Costs of Conflict Resolution and Financial Distress: Evidence from the Texaco-Pennzoil Litigation," Scholarly Articles 2689179, Harvard University Department of Economics.
  5. Baird, Douglas G., 1991. "The initiation problem in bankruptcy," International Review of Law and Economics, Elsevier, vol. 11(2), pages 223-232, September.
  6. 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.
  7. 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.
  8. Gertner, Robert & Scharfstein, David, 1991. " A Theory of Workouts and the Effects of Reorganization Law," Journal of Finance, American Finance Association, vol. 46(4), pages 1189-1222, September.
  9. Michael C. Jensen, 1991. "Corporate Control And The Politics Of Finance," Journal of Applied Corporate Finance, Morgan Stanley, vol. 4(2), pages 13-34.
  10. 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.
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