A New Approach to Transnational Insolvencies

Abstract:     
This paper looks at the problems caused by the insolvencies of a multinational firm. It suggests that the current academic consensus that a single proceeding is optimal for all such insolvencies may not withstand scrutiny. It proposes that, as a first order solution, multinational firms should be allowed to select their own insolvency rules from a menu of options. A second best solution would be to allow multinational corporations to select, via a forum selection clause in the corporate charter, which country's or countries' bankruptcy regime will apply in the case of financial distress.

JEL Classification: G33, G34, G38, K22

working papers series