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Pro-Debtor Bias, Court Shopping, and Bankruptcy Outcomes

Author

Listed:
  • Kris Boudt
  • Florencio López-de-Silanes
  • Rafael Matta
  • Shilin Zhang

Abstract

We propose an indicator for pro-debtor bias in Chapter 11 judicial decisions and relate it to court shopping and bankruptcy resolution. We find that pro-debtor bias is significantly higher for the so-called bootstrap shoppers who file in a district that is neither their main place of business or main assets nor the district of incorporation. In addition, we find that pro-debtor bias reputation of a court is a significant driver of success in attracting shoppers. Furthermore, we show that pro-debtor bias is detrimental for bankruptcy outcomes since the cases with more pro-debtor bias tend to have a higher refiling rate.

Suggested Citation

  • Kris Boudt & Florencio López-de-Silanes & Rafael Matta & Shilin Zhang, 2024. "Pro-Debtor Bias, Court Shopping, and Bankruptcy Outcomes," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 24/1088, Ghent University, Faculty of Economics and Business Administration.
    • Handle: RePEc:rug:rugwps:24/1088
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    File URL: http://wps-feb.ugent.be/Papers/wp_24_1088.pdf
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    References listed on IDEAS

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    5. Nicola Gennaioli & Stefano Rossi, 2010. "Judicial Discretion in Corporate Bankruptcy," The Review of Financial Studies, Society for Financial Studies, vol. 23(11), pages 4078-4114, November.
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