The Real Effects of Bankruptcy Forum Shopping

Samuel Antill and Aymeric Bellon

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: Many non-Delaware firms strategically file for bankruptcy in Delaware. Should this "forum shopping" be allowed? This question has motivated nine proposed congressional bills over decades of policy debate. Using a novel natural experiment and Census-Bureau microdata, we inform this debate. Comparing similar firms within a Delaware-adjacent state, we show that proximity to Delaware predicts forum shopping. Instrumenting with proximity, we find that forum shopping causally: (i) prevents closures and liquidations, (ii) shortens bankruptcies, (iii) boosts creditor recovery, and (iv) increases post-bankruptcy employment by 24.8%. Proximity to Delaware is uncorrelated with growth for not-yet-bankrupt or never-bankrupt firms, validating the exclusion restriction.

Keywords: corporate bankruptcy; law and finance; forum shopping; venue selection; financial distress (search for similar items in EconPapers)
JEL-codes: G33 G34 G38 K22 (search for similar items in EconPapers)
Date: 2026-05
New Economics Papers: this item is included in nep-inv
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https://www2.census.gov/library/working-papers/2026/adrm/ces/CES-WP-26-29.pdf First version, 2026 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:26-29

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