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
Date Written: October 2, 2008
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: Suggested Citation