Choosing Corporate Bankruptcy Counsel

Abstract:     
While several articles in the last decade have illuminated the basic costs that these professionals add to the chapter 11 process, little else is understood about the role of professionals in chapter 11. Even in the rarified world of public-company bankruptcies, the basic question of how debtors choose bankruptcy counsel has never been the subject of any empirical inquiry. But the choice of counsel has important implications - most notably, because some have argued that debtor's counsel may steer cases to jurisdictions like Delaware and New York, with possible detrimental effects on the debtor's reorganization. This short paper investigates several questions related to the choice of debtor's counsel by examining a new sample of 275 large chapter 11 cases commenced in 2001 through early 2005. Among other things, I find that this market has many more participants than might have been expected. And debtor size only explains a small part of the decision to hire one of the leading law firms as bankruptcy counsel. In short, the market for corporate bankruptcy counsel defies easy, anecdotal explanation.

Keywords: Chapter 11, bankruptcy, counsel, direct costs

Accepted Paper Series