In this paper, we empirically estimate the costs of delay in the FDIC's closures of 433 commercial banks between 2007 and 2014 based upon a counterfactual closure regime. We find that the costs of delay could have been as high as $18.5 billion, or 37% of the FDIC's estimated costs of closure of...

Banks' living wills involve both recovery and resolution. Since it may not always be clear when recovery plans or actions should be triggered, there is a role for an objective metric to trigger recovery. We outline how such a metric could be constructed meeting criteria of (i) adequate loss...

Certain insolvency law rules, like creditors' priorities and set-off rights, have a distributive impact on creditors. Distributional rules reflect the hierarchies of values and interests in each jurisdiction and, as a result, have high political relevance and pose an obstacle to reforming the EU...

After extensive tripartite discussions between the European Parliament, The European Commission and the Council the long anticipated Regulation (EU) 2015/848 of 20th of May 2015 on Insolvency Proceedings was finally adopted and published in the Official Journal on June 5th, 2015. It came into...

Legal rules play a powerful but understudied role in security design. This article presents two new theoretical results about the design of debt contracts. The results derive from the premise that firms must avoid legal insolvency when issuing new debt because insolvency at issuance would...

A generally accepted view is that sophisticated bankruptcy procedures are required to mitigate coordination failures and fire sale discounts arising from financial distress. In this paper, we study an industry not subject to mandatory bankruptcy procedures; instead, the shipping industry has...

We examine the role of corporate pension plans in determining how firms restructure in financial distress. Both defined benefit (DB) and defined contribution (DC) plans can have significant exposures to the company's own stock, imposing significant losses on employees if the firm defaults and/or...

This paper provides evidence on the value creation of bankruptcy procedures that belong to different legal systems (French civil law, German civil law, and British common law). Using a sample of 900 hand-collected corporate bankruptcy files, we find that France and Germany show quite similar...

Bankruptcy is a precise legal process defining the rules when debtor fails to repay their debts. These rules determine willingness to lend and to borrow and thus can affect economic growth. In 1706, the English Parliament passed a bankruptcy statute that provided potential rights for bankrupts...

The finance market has undergone rapid change in developed Western economies in the last decade. In much of Europe the concentrated finance market in which a small group of banks controlled the flow of finance to large and small companies has given way to a dispersed creditor economy. In both...