Ex-Ante Efficiency of Bankruptcy Procedures
14 Pages Posted: 8 Jan 1997
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: Suggested Citation