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Bankruptcy And Economic Recovery, Thomas H. Jackson, David A. Skeel Jr.
Bankruptcy And Economic Recovery, Thomas H. Jackson, David A. Skeel Jr.
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To measure economic growth or recovery, one traditionally looks to metrics such as the unemployment rate and the growth in GDP. And in terms of figuring out institutional policies that will stimulate economic growth, the focus most often is on policies that encourage investment, entrepreneurial enterprises, and reward risk-taking with appropriate returns. Bankruptcy academics that we are, we tend to add our own area of expertise to this stable— with the firm belief that thinking critically about bankruptcy policy is an important element of any set of institutions designed to speed economic recovery. In this paper, written for a book …
Bankruptcy Law As A Liquidity Provider, Kenneth M. Ayotte, David A. Skeel Jr.
Bankruptcy Law As A Liquidity Provider, Kenneth M. Ayotte, David A. Skeel Jr.
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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 …