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Ex-ante Efficiency of Bankruptcy Procedures

Author

Listed:
  • Francesca Cornelli

    (London Business School)

  • Leonardo Felli

    (London School of Economics)

Abstract

This paper suggests a framework to analyze the efficiency properties of bankruptcy procedures, distinguishing between ex-ante and ex-post efficiency. Ex-post efficiency consists in maximizing the ex-post value of the insolvent firm, whereas ex-ante efficiency consists in maximizing the proceeds to creditors from the reorganization of the firm and providing incentives for the creditors to monitor the firm. We show that the definition of creditors rights over the company and the protection of the creditors' seniority, are crucial to asses the ex-ante efficiency of a bankruptcy procedure.

Suggested Citation

  • Francesca Cornelli & Leonardo Felli, 1996. "Ex-ante Efficiency of Bankruptcy Procedures," Finance 9610001, University Library of Munich, Germany.
    • Handle: RePEc:wpa:wuwpfi:9610001
    Note: Type of Document - Latex; prepared on IBM PC - PC-TEX; to print on PostScript 300DPI; pages: 14
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    bankruptcy; ex-ante efficiency; revenue efficiency; absolute priority rule;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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