A Game Theoretic Analysis of the Relative Payouts to Operational Creditors and Financial Creditors from Bankruptcy Resolution in India

Prasad Rohit (), Gaurav Gupta and Mathur Yogesh B.
Additional contact information
Prasad Rohit: Management Development Institute, Economics, Gurgaon, 122001, India
Mathur Yogesh B.: Management Development Institute, Economics, Gurgaon, 122001, India

Asian Journal of Law and Economics, 2020, vol. 11, issue 2, 21

Abstract: This paper analyses the outcomes of the cases resolved under Insolvency and Bankruptcy Code of India to examine the treatment of admitted claims for the two main classes of creditors i.e. operational and financial creditors. It shows that, at an aggregate level, operational creditors and financial creditors realize an equal percentage of their claims. However, at an individual level, there is wide heterogeneity in the treatment of the two classes of creditors. Three benchmark division rules – Proportional division, Constrained Equal Losses and Constrained Equal Awards, are used to characterize the actual divisions in each case. This analysis allows us to hypothesize that when aggregate claims of operational creditors are tiny, the Constrained Equal Awards (that is extremely generous to small creditors), does well. When aggregate claims of operational creditors are large, the Proportional rule does well. But when the claims of operational creditors fall in an intermediate range, the Constrained Equal Losses rule which is most unfavourable to the operational creditor comes to the fore. Hence, some broad guidelines that can be applied on a case by case basis appear to be desirable.

Keywords: bankruptcy law; financial creditors; game theory; India; operational creditors (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1515/ajle-2020-0017 (text/html)
For access to full text, subscription to the journal or payment for the individual article is required.

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:bpj:ajlecn:v:11:y:2020:i:2:p:21:n:2

Ordering information: This journal article can be ordered from
https://www.degruyter.com/journal/key/ajle/html

DOI: 10.1515/ajle-2020-0017

Access Statistics for this article

Asian Journal of Law and Economics is currently edited by Noriyuki Yanagawa

More articles in Asian Journal of Law and Economics from De Gruyter
Bibliographic data for series maintained by Peter Golla ().