Open Access. Powered by Scholars. Published by Universities.®
- Keyword
-
- Ad hoc rescues (1)
- Adverse selection (1)
- Bailout (1)
- Bankruptcy (1)
- Bankruptcy Law (1)
-
- Chapter 11 reorganization (1)
- Corporations (1)
- Creditor runs (1)
- Creditors' bargain (1)
- Debt overhang (1)
- Debt overhangs (1)
- Derivatives (1)
- Federal Reserve (1)
- Financial crisis (1)
- Government rescue (1)
- Insolvency (1)
- Intervention in financial markets (1)
- Investment banking (1)
- Law and Economics (1)
- Lehman Brothers (1)
- Liquidity (1)
- Systemic risk (1)
Articles 1 - 2 of 2
Full-Text Articles in Law
Bankruptcy Law As A Liquidity Provider, Kenneth Ayotte, David Skeel
Bankruptcy Law As A Liquidity Provider, Kenneth Ayotte, David Skeel
Kenneth Ayotte
Since the outset of the recent financial crisis, liquidity problems have been cited as the cause behind the bankruptcies and near bankruptcies of numerous firms, ranging from Bear Stearns and Lehman Brothers in 2008 to Kodak more recently. This paper expands the prevailing normative theory of corporate bankruptcy — the Creditors’ Bargain theory — to include a role for bankruptcy as a provider of liquidity. The Creditors’ Bargain theory argues that bankruptcy law should be limited to solving problems caused by multiple, uncoordinated creditors, but focuses almost exclusively on the problem of creditor runs. We argue that two well-known problems …
Bankruptcy Or Bailouts?, Kenneth Ayotte, David Skeel
Bankruptcy Or Bailouts?, Kenneth Ayotte, David Skeel
Kenneth Ayotte
The usual reaction if one mentions bankruptcy as a mechanism for addressing a financial institution’s default is incredulity. Those who favor the rescue of troubled financial institutions, and even those who prefer that their assets be promptly sold to a healthier institution, treat bankruptcy as anathema. Everyone seems to agree that nothing good can come from bankruptcy. Indeed, the Chapter 11 filing by Lehman Brothers has been singled out by many the primary cause of the severe economic and financial contraction that followed, and proof that bankruptcy is disorderly and ineffective. As a result, ad-hoc rescue lending to avoid bankruptcy …