Does it Matter How Bankruptcy Judges Evaluate the Creditors' Best-Interests Test?

American Bankruptcy Law Journal, Vol. 81, No. 4, pp. 497-514, 2007

21 Pages Posted: 5 Oct 2008

See all articles by Timothy C. G. Fisher

Timothy C. G. Fisher

University of Sydney, School of Economics

Jocelyn Martel

ESSEC Business School

Date Written: October 2, 2008

Abstract

This paper examines the sensitivity of the best-interests test for a sample of Canadian firms undergoing court-supervized reorganization. We find that, although the choice of discount rate has an impact on the magnitude of the reorganization surplus to unsecured creditors, it has very limited impact on the proportion of proposals complying with the best-interests test. Likewise for the probability of success of a proposal and the time in liquidation. In contrast, the ratio of the market to book value of asset is the most relevant variable in determining the compliance with the best-interests test.

Keywords: Best-interests test, bankruptcy, reorganization

JEL Classification: G33, L11

Suggested Citation

Fisher, Timothy C. G. and Martel, Jocelyn, Does it Matter How Bankruptcy Judges Evaluate the Creditors' Best-Interests Test? (October 2, 2008). American Bankruptcy Law Journal, Vol. 81, No. 4, pp. 497-514, 2007, Available at SSRN: https://ssrn.com/abstract=1277216

Timothy C. G. Fisher

University of Sydney, School of Economics ( email )

Sydney
Australia

Jocelyn Martel (Contact Author)

ESSEC Business School ( email )

Avenue Bernard Hirsch B.P. 50105
Cergy-Pontoise, 95021
France
33 1 34 43 33 21 (Phone)

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