Discusses Chapter 11, which structures complex neg

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Nearsighted Justice

Discusses Chapter 11, which structures complex neg

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By Dan Bernhardt (au); Ed Nosal (au)
Year: 2003
Pages: 31
Binding Paperback

Product Code: 1437902723

Description

Discusses Chapter 11, which structures complex negotiations between creditors and debtors that are overseen by a bankruptcy court. Identifies conditions under which it is optimal for the court to err in determining whether a firm should be liquidated. Figures the optimal error rate without renegotiation, providing conditions under which it is optimal for the court both to mistakenly liquidate “good firms,” but not “bad firms.” When creditors and debtors can renegotiate to circumvent a court and creditors have all of the bargaining power, a “blind” court -- one that ignores all info. and is equally likely to liquidate a good firm as a bad one -- is optimal. For another class of action choices, the optimal court design places the burden of proof on the entrepreneur.

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