Ex-Ante Efficiency of Bankruptcy Procedures

14 Pages Posted: 8 Jan 1997

See all articles by Francesca Cornelli

Francesca Cornelli

London Business School; Centre for Economic Policy Research (CEPR)

Leonardo Felli

University of Cambridge, Faculty of Economics; CESifo (Center for Economic Studies and Ifo Institute); Centre for Economic Policy Research (CEPR)

Abstract

This paper suggests a framework to analyze the efficiency properties of bankruptcy procedures, distinguishing between ex-ante and ex-post efficiency. Ex-post efficiency consists in maximizing the ex-post value of the insolvent firm, whereas ex-ante efficiency consists in maximizing the proceeds to creditors from the reorganization of the firm and providing incentives for the creditors to monitor the firm. We show that the definition of creditors rights over the company and the protection of the creditors' seniority, are crucial to assess the ex-ante efficiency of a bankruptcy procedure.

JEL Classification: G32, G33

Suggested Citation

Cornelli, Francesca and Felli, Leonardo, Ex-Ante Efficiency of Bankruptcy Procedures. Available at SSRN: https://ssrn.com/abstract=34857 or http://dx.doi.org/10.2139/ssrn.34857

Francesca Cornelli (Contact Author)

London Business School ( email )

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+44 20 7724 3317 (Fax)

HOME PAGE: http://www.lbs.ac.uk/faculty/fcornelli/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Leonardo Felli

University of Cambridge, Faculty of Economics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 335221 (Phone)

HOME PAGE: http://www.felli.info

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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