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Bankruptcy Law: a Mechanism of Governance for Financially Distressed Firms

  • Régis Blazy
  • Bertrand Chopard
  • Agnès Fimayer

This paper explores the various governance models for financially distressed firms. We offer a new typology of major bankruptcy models and provide a connection between this bankruptcy law puzzle and the variables depicting the governance of healthy firms in order to shed light on two topics: (1) the factors that the lawyer should consider before removing its national bankruptcy law, and (2) the risks associated with each bankruptcy model according to the economic literature on bankruptcy law. Our final aim is to test whether the various bankruptcy models detailed in the paper perform in separate economic and legal environments.

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Paper provided by Bureau d'Economie Théorique et Appliquée, UDS, Strasbourg in its series Working Papers of BETA with number 2007-33.

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Date of creation: 2007
Date of revision:
Handle: RePEc:ulp:sbbeta:2007-33
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  1. Philippe Aghion & Oliver Hart & John Moore, 1992. "The Economics of Bankruptcy Reform," NBER Working Papers 4097, National Bureau of Economic Research, Inc.
  2. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Legal Determinants of External Finance," Working Paper 19443, Harvard University OpenScholar.
  3. Rafael LaPorta & Florencio Lopez de-Silanes & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," Harvard Institute of Economic Research Working Papers 1768, Harvard - Institute of Economic Research.
    • La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert W., 1998. "Law and Finance," Scholarly Articles 3451310, Harvard University Department of Economics.
    • Rafael La Porta & Florencio Lopez-de-Silane & Andrei Shleifer & Robert W. Vishny, 1996. "Law and Finance," NBER Working Papers 5661, National Bureau of Economic Research, Inc.
    • Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert W. Vishny, . "Law and Finance," Working Paper 19451, Harvard University OpenScholar.
  4. Julian R. Franks & Kjell G. Nyborg & Walter N. Torous, 1996. "A Comparison of UK, US and German Insolvency Codes," Financial Management, Financial Management Association, vol. 25(3), Fall.
  5. Li, David D. & Li, Shan, 1999. "An agency theory of the bankruptcy law," International Review of Economics & Finance, Elsevier, vol. 8(1), pages 1-24, January.
  6. Manove, Michael & Padilla, Atilano Jorge & Pagano, Marco, 2000. "Collateral Vs. Project Screening: A Model Of Lazy Banks," CEPR Discussion Papers 2439, C.E.P.R. Discussion Papers.
  7. Levine, Ross, 2002. "Bank-Based or Market-Based Financial Systems: Which Is Better?," Journal of Financial Intermediation, Elsevier, vol. 11(4), pages 398-428, October.
  8. Alberto Zazzaro, 2005. "Should Courts Enforce Credit Contracts Strictly?," Economic Journal, Royal Economic Society, vol. 115(500), pages 166-184, 01.
  9. Rafael LaPorta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, . "Investor Protection and Corporate Governance," Working Paper 19455, Harvard University OpenScholar.
  10. Juan C. Botero & Simeon Djankov & Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer, 2004. "The Regulation of Labor," The Quarterly Journal of Economics, Oxford University Press, vol. 119(4), pages 1339-1382.
  11. Myers, Stewart C., 1977. "Determinants of corporate borrowing," Journal of Financial Economics, Elsevier, vol. 5(2), pages 147-175, November.
  12. Povel, Paul, 1999. "Optimal "Soft" or "Tough" Bankruptcy Procedures," Journal of Law, Economics and Organization, Oxford University Press, vol. 15(3), pages 659-84, October.
  13. Ergungor, O. Emre, 2004. "Market- vs. bank-based financial systems: Do rights and regulations really matter?," Journal of Banking & Finance, Elsevier, vol. 28(12), pages 2869-2887, December.
  14. 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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