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http://ssrn.com/abstract=2176316
 
 

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Governance in Financial Distress and Bankruptcy


Kenneth Ayotte


University of California, Berkeley - School of Law

Edith S. Hotchkiss


Boston College - Carroll School of Management

Karin S. Thorburn


Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

November 15, 2012

Oxford Handbook of Corporate Governance, Forthcoming
Northwestern Public Law Research Paper No. 12-37

Abstract:     
This chapter, for the Oxford Handbook of Corporate Governance, provides a survey of law, economics, and finance scholarship at the intersection of corporate governance and financial distress. In financial distress, both inside and outside of bankruptcy court, formal and informal control rights are paramount. Thus, we organize our review around the major constituencies that exercise control rights in distressed firms: shareholders, managers and boards; senior and junior creditors; and the law, courts and judges. Broadly, our review suggests that an understanding of the incentives of these constituencies is crucial to explaining outcomes. Our review also documents the paradigm shift in the bankruptcy literature, away from the “safe haven” view of Chapter 11 as a slow, manager and shareholder-controlled reorganization process. Chapter 11 case outcomes are increasingly steered by sophisticated activist investors, generating faster resolutions that are more creditor-controlled. We suggest some directions for future research in light of these developments.

Number of Pages in PDF File: 44

Keywords: bankruptcy, reorganization, corporate finance, corporate governance, Chapter 11

JEL Classification: G30, G33, G34

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Date posted: November 16, 2012 ; Last revised: December 29, 2012

Suggested Citation

Ayotte, Kenneth and Hotchkiss, Edith S. and Thorburn, Karin S., Governance in Financial Distress and Bankruptcy (November 15, 2012). Oxford Handbook of Corporate Governance, Forthcoming; Northwestern Public Law Research Paper No. 12-37. Available at SSRN: http://ssrn.com/abstract=2176316

Contact Information

Kenneth Ayotte
University of California, Berkeley - School of Law ( email )
215 Boalt Hall
Berkeley, CA 94720-7200
United States
Edith S. Hotchkiss (Contact Author)
Boston College - Carroll School of Management ( email )
140 Commonwealth Avenue
Department of Finance Fulton Hall, Room 330
Chestnut Hill, MA 02467
United States
617-552-3240 (Phone)
617-552-0431 (Fax)
Karin S. Thorburn
Norwegian School of Economics ( email )
Helleveien 30
N-5045 Bergen
Norway
+4755959283 (Phone)
HOME PAGE: http://www.nhh.no/cv/thorburn
Centre for Economic Policy Research (CEPR)
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
European Corporate Governance Institute (ECGI)
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
HOME PAGE: http://www.ecgi.org
Feedback to SSRN


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