文档介绍：Chapter 9
Bankruptcy procedures
Critique of existing procedures
(i) Auctions. The problem with auctions is that assets sold off piecemeal
may be sold at a substantial discount.
The financing problem. It takes too long to raise money from a large
• number of investors. A small number of investors may be risk averse
and unwilling to pay the expected value of the assets.
Lack-petition problem. The costs of participating in an auction
• keeps the numbers small.
(ii) Structured Bargaining. (., Chapter 11). Chapter 11 mixes two
kinds of problems, who should get what (whose debt forgiven and by how
much) and what should be done with the firm (liquidated, anized, and
if anized under what financial structure). Conflicts of interest and
asymmetric information are likely to lead to breakdown. Placing decisions in
the hands of representatives and supervising judges creates agency problems.
Problems with Chapter 11: (a) takes a great deal of time; (b) serious loss
of value during Chapter 11; (c) significant legal and administrative costs; (d)
soft on management; (e) judges abuse discretionary power.
Incentives to delay: ability to delay resolution gives bargaining power to
junior creditors (. alternating offers bargaining); option value of delay in
case value of assets increases.
(iii) Administration. (., the French system). Saves costs and unlikely
to