This paper contributes to the debate on optimal bankruptcy reform by providing a set of results that challenge the wisdom that "soft" bankruptcy codes have necessarily positive effects. The model hinges on the key idea that "soft" bankruptcy allows a poor performing entrepreneur to renegotiate...

The bankruptcy system plays an important role in resolving financial distress and reallocating resources in the economy. While many believe that transparency is central to an efficient bankruptcy system, the Bankruptcy Code lacks clear standards for disclosure and financial reporting. In this...

We study the impact of different bankruptcy laws in general equilibrium, taking into account the interactions between the credit and labour markets, as well as wealth heterogeneity. Soft bankruptcy laws often preclude liquidation, to avoid ex-post inefficiencies. This worsens credit rationing,...

Empirical evidence suggests that banks often engage in refinancing of intrinsically insolvent debtors instead of writing of their non-performing loans. Such forbearance lending may induce soft budget constraints for the debtors, as it diminishes their incentives to thwart default. This paper...

Two recent papers examine the impact of corporate bankruptcy laws on new business start-ups in 29 countries over 1990 - 2008 (Peng et al., 2010; Lee et al., 2010). In this commentary, I briefly point out two significant issues which future researchers might want to consider. First, several countries...

Two recent papers examine the impact of corporate bankruptcy laws on new business start-ups in 29 countries over 1990 - 2008 (Peng et al., 2010; Lee et al., 2010). In this commentary, I briefly point out two significant issues which future researchers might want to consider. First, several countries...

The paper analyses options in case of insolvency. Although insolvency plans empirically are very successful, they are not used very much. Reasons that prevent their application and possibilities for their promotion are discussed. -- Insolvenz ; Insolvenzplan ; Insolvenzverwalter ;...

For nearly two years, the two of us have had a running discussion of the costs and benefits of automatic stays in bankruptcy for qualified financial contracts (QFCs) such as derivatives and repurchase agreements, particularly those held by systemically important major dealer banks. Under current...