Section 365 of the Bankruptcy Code prohibits enforcement of the once common quot;ipso factoquot; clause.quot; The clause excuses the solvent party from performance of the contract when the other party becomes insolvent. We show that the ability of insolvent firms to continue bad projects is...

Section 365 of the Bankruptcy Code prohibits enforcement of the once common "ipso facto" clause." The clause excuses the solvent party from performance of the contract when the other party becomes insolvent. We show that the ability of insolvent firms to continue bad projects is enhanced by the...

We study the effect of legal constraints in an environment in which agents face demand shocks they would like to smooth, but also have weakness of will: agents' long and short run preferences are misaligned. Some agents are sophisticated -- they know they will make inconsistent intertemporal...

We consider how the state should regulate the consumption of pecuniary private benefits of control by controlling shareholders. These benefits have efficient aspects: they compensate the controlling shareholder for monitoring managers and for investing effort to create and implement projects....