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Failure's Futures: Controlling The Market For Information In Corporate Reorganization, Jonathan C. Lipson
Jonathan C. Lipson
This Article identifies and explores an important gap in bankruptcy theory and policy, with significant implications for the coming wave of major business failures: How to manage information about financially distressed businesses?
The paper makes three claims. First, Chapter 11 of the United States Bankruptcy Code plays a unique informational role, as it creates mechanisms to explain a debtor’s failure and to promote reinvestment. Second, the information functions performed by this system face internal and external threats. Internally, bankruptcy reorganization increasingly resembles an unregulated securities market, dominated by sophisticated, wealthy investors whose motives and strategies are often highly opaque. Their …