Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/183477 
Authors: 
Year of Publication: 
2017
Series/Report no.: 
IHS Economics Series No. 334
Publisher: 
Institute for Advanced Studies (IHS), Vienna
Abstract: 
This paper examines the phenomenon of management-initiated, court-supervised reorganization of companies in U.S. bankruptcy court. The proposed in-court persuasion mechanism reconciles excessive reorganizations of non-viable companies (and subsequent repeat failures) with management-initiated filings and a judge who aims to always take appropriate action. In the model, management makes a preemptive voluntary filing to retain control of the process, and thereby engage in a game of Bayesian Persuasion with asymmetric information vis-à-vis the judge. This mechanism endogenously results in the reorganization of some non-viable companies, and exclusively management-initiated (i.e., voluntary) bankruptcy filings. This paper, therefore, explains why non-viable companies could be permitted to reorganize and why there are repeat offender firms that enter bankruptcy multiple times.
Subjects: 
Bayesian Persuasion
Bankruptcy
Chapter 11
Asymmetric Information
JEL: 
C72
D21
D72
D82
D83
G33
K20
K40
Creative Commons License: 
cc-by Logo
Document Type: 
Working Paper

Files in This Item:
File
Size
342.38 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.