An Economic Analysis of Transnational Bankruptcies
Lucian A. Bebchuk
Harvard Law School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)
Andrew T. Guzman
University of California, Berkeley - School of Law
Journal of Law and Economics, Vol. 42, pp. 775-808, 1999
Harvard Law and Economics Discussion Paper No. 180, 1996
This paper analyzes the effects of the legal rules governing transnational bankruptcies. We compare a regime of "territoriality" - in which assets are adjudicated by the jurisdiction in which they are located at the time of the bankruptcy - with a regime of "universality," in which all assets are adjudicated in a single jurisdiction. Territoriality is shown to generate a distortion in investment patterns that might lead to an inefficient allocation of capital across countries. We also analyze who gains and who loses from territoriality, explain why countries engage in it even though it reduces global welfare, and identify what can be done to achieve universality.
Number of Pages in PDF File: 31
JEL Classification: G33, G15Accepted Paper Series
Date posted: July 11, 2000 ; Last revised: May 5, 2009
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