Ex-ante Efficiency of Bankruptcy Procedures

Francesca Cornelli and Leonardo Felli ()
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Francesca Cornelli: London Business School

Finance from EconWPA

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 asses the ex-ante efficiency of a bankruptcy procedure.

Keywords: bankruptcy; ex-ante efficiency; revenue efficiency; absolute priority rule (search for similar items in EconPapers)
JEL-codes: G32 (search for similar items in EconPapers)
Date: 1996-10-07
Note: Type of Document - Latex; prepared on IBM PC - PC-TEX; to print on PostScript 300DPI; pages: 14
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Related works:
Journal Article: Ex-ante efficiency of bankruptcy procedures (1997)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:9610001

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