While credit risk transfer market dramatically increases the complexity of lender's incentive structure and above all reduces the incentives of the bank to monitor debtor, a ‘harsh' bankruptcy environment (as evidenced in the shift from the debtor controlled to creditor controlled...

The European Union (EU) has been debating for several years whether to change from the legal capital regime as regulated under the Second Company Law Directive to a solvency test regime as applied in the US, for example. Based on an analysis of direct compliance costs and capital maintenance...

This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced — or has failed to influence — federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH...

The failure of financial institutions is often depicted as an externally-driven event in which certain triggers almost inevitably lead to the collapse of the firm. In contrast, this paper views institutional failure as a multistage process in which precautionary measures taken by the firm can...

Bankruptcy and corporate laws in several countries allow or require courts to subordinate loans by shareholders to corporations. Examples include the equitable subordination and recharacterization doctrines in the US and the German Eigenkapitalersatzrecht. Scholars have not devoted much...

In a typical "phoenix syndrome" scenario, a small business entrepreneur who controls the financially distressed Company A registers Company B, to which the assets of Company A are transferred in what appears to be fraudulent conveyance. Company B serves as a vehicle through which the business is...

This note, on the basis of a review of the current law related to disclosure of acquisition of claims against distressed companies and the proposals for regulation of this area, argues that no new (legislative) regulation is necessary, as the market tends to regulate itself, under the...

This paper studies the spread of losses and defaults in financial networks with two interrelated features: collateral requirements and alternative contract termination rules, which control access to collateral. When collateral is committed to a firm's counter-parties, a solvent firm may default...

The U.S. Chapter 7 bankruptcy system relies on private trustees to administer liquidations. By law, creditors pay trustees a substantial commission on asset sales. I exploit kinks in the commission function to estimate a structural model of moral hazard by trustees. While reducing commissions...