This research investigates how the legal sanctions prevailing under bankruptcy code impact on the design of debt … actively trades off between private renegotiation and costly bankruptcy procedure. Besides, the debtor’s investment policy … investment project (economic efficiency) and bankruptcy costs are avoided through private renegotiation (legal efficiency): this …

This research investigates how bankruptcy law influences the design of debt contracts and the investments choices. We … bankruptcy only. This way of resolving financial distress can be avoided yet, if a private agreement is achieved. First, – when … sanctions are high – we show costly bankruptcy may be preferred by honest firms over private negotiation: thus, costly …

Literature on ex-ante efficiency of bankruptcy procedures investigates how these procedures influence the behavior of … managers and creditors. We extend this literature by explaining how bankruptcy law can influence the design of debt contracts …

which bankruptcy courts have to combine both social efficiency (maintaining employment) and ex post financial efficiency … as a going concern or liquidation). Addressing this dilemma, we discuss the determinants of bankruptcy courts’ selection … employment by facilitating continuation and reducing the domino effects of bankruptcy. (2) the courts’ choice between rival …