Pro-Debtor Bias, Court Shopping, and Bankruptcy Outcomes

Kris Boudt (), Florencio López- de-Silanes (), Rafael Matta and Shilin Zhang ()
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Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: We propose an indicator for pro-debtor bias in Chapter 11 judicial decisions and relate it to court shopping and bankruptcy resolution. We find that pro-debtor bias is significantly higher for the so-called bootstrap shoppers who file in a district that is neither their main place of business or main assets nor the district of incorporation. In addition, we find that pro-debtor bias reputation of a court is a significant driver of success in attracting shoppers. Furthermore, we show that pro-debtor bias is detrimental for bankruptcy outcomes since the cases with more pro-debtor bias tend to have a higher refiling rate.

Keywords: Bootstrap shopping; Court shopping; Chapter 11; Pro-debtor bias (search for similar items in EconPapers)
Pages: 57 pages
Date: 2024-06
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:24/1088

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