Optimal Bankruptcy Laws Across Different Economic Systems

47 Pages Posted: 6 Dec 1998

See all articles by Ronen Israel

Ronen Israel

Interdisciplinary Center, Herzliyah

Elazar Berkovitch

Interdisciplinary Center, Herzliyah

Multiple version iconThere are 2 versions of this paper

Date Written: June 1998

Abstract

We model fundamental differences across economic systems and propose optimal bankruptcy laws. We show that creditors-debtors relationships in a given economy are affected by the ability of creditors to obtain information about fundamentals and the managers' ability to strategically use their private information. An optimal bankruptcy law utilizes creditors' information, while minimizing managers' use of strategic information.

Our proposed laws for a developed bank-based system like Germany includes a creditor chapter only for a developed market-based system like the U.S.A. includes both a creditor chapter and a debtor chapter, and for an under-developed system includes both a creditor chapter and a debtor chapter that gives the manager more protection than in a market-based system.

JEL Classification: G2, G3, K0, K4

Suggested Citation

Israel, Ronen and Berkovitch, Elazar, Optimal Bankruptcy Laws Across Different Economic Systems (June 1998). Available at SSRN: https://ssrn.com/abstract=140777 or http://dx.doi.org/10.2139/ssrn.140777

Ronen Israel (Contact Author)

Interdisciplinary Center, Herzliyah ( email )

P.O. Box 167
Herzliya, 4610101
Israel
972-9-9527306 (Phone)

Elazar Berkovitch

Interdisciplinary Center, Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
466
Abstract Views
2,698
Rank
121,924
PlumX Metrics