Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures

Matthias Frieden () and Stefan Wielenberg ()
Additional contact information
Matthias Frieden: Leibniz-University Hanover
Stefan Wielenberg: Leibniz-University Hanover

Business Research, 2017, vol. 10, issue 2, No 1, 159-187

Abstract: Abstract An insolvency administrator replaces the manager of an insolvent firm to devise and organize a liquidation or reorganization plan in the creditors’ interest. In the course of the process, the insolvency administrator presents the most favourable option from his perspective, and the creditors choose to accept or reject this plan. Conflicts of interest arise because the insolvency administrator, as the better-informed party, considers in his proposal liability risks and reputational issues that are beyond the creditors’ scope. We model this conflict as a Bayesian game and find that, under those compensation schemes typically used in real-world regulations, optimal creditor satisfaction and efficient decisions concerning the economic future of the insolvent firm will never be achieved simultaneously.

Keywords: Bankruptcy; Insolvency administrator; Creditor; Incentives; Compensation (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://link.springer.com/10.1007/s40685-017-0047-x Abstract (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:busres:v:10:y:2017:i:2:d:10.1007_s40685-017-0047-x

Ordering information: This journal article can be ordered from
http://www.springer.com/journal/40685

DOI: 10.1007/s40685-017-0047-x

Access Statistics for this article

Business Research is currently edited by Thomas Gehrig

More articles in Business Research from Springer, German Academic Association for Business Research Contact information at EDIRC.
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().