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Bankruptcy's Cathedral: Property Rules, Liability Rules, And Distress, Vincent S.J. Buccola

Northwestern University Law Review

What justifies corporate bankruptcy law in the modern economy? For forty years, economically oriented theorists have rationalized bankruptcy as an antidote to potential coordination failures associated with a company’s financial distress. But the sophistication of financial contracting and the depth of capital markets today threaten the practical plausibility, if not the theoretical soundness, of the conventional model. This Article sets out a framework for assessing bankruptcy law that accounts for changes in the technology of corporate finance. It then applies the framework to three important artifacts of contemporary American bankruptcy practice, pointing toward a radically streamlined vision of the field. …