An Economic Analysis of Transnational Bankruptcies

31 Pages Posted: 11 Jul 2000 Last revised: 5 May 2009

Lucian A. Bebchuk

Harvard Law School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Andrew T. Guzman

USC Gould School of Law

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Abstract

This paper analyzes the effects of the legal rules governing transnational bankruptcies. We compare a regime of "territoriality" - in which assets are adjudicated by the jurisdiction in which they are located at the time of the bankruptcy - with a regime of "universality," in which all assets are adjudicated in a single jurisdiction. Territoriality is shown to generate a distortion in investment patterns that might lead to an inefficient allocation of capital across countries. We also analyze who gains and who loses from territoriality, explain why countries engage in it even though it reduces global welfare, and identify what can be done to achieve universality.

JEL Classification: G33, G15

Suggested Citation

Bebchuk, Lucian A. and Guzman, Andrew T., An Economic Analysis of Transnational Bankruptcies. Journal of Law and Economics, Vol. 42, pp. 775-808, 1999; Harvard Law and Economics Discussion Paper No. 180, 1996. Available at SSRN: https://ssrn.com/abstract=200992 or http://dx.doi.org/10.2139/ssrn.200992

Lucian A. Bebchuk (Contact Author)

Harvard Law School ( email )

Cambridge, MA 02138
United States
617-495-3138 (Phone)
617-812-0554 (Fax)

HOME PAGE: http://www.law.harvard.edu/faculty/bebchuk/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR) and European Corporate Governance Institute (ECGI)

Andrew T. Guzman

USC Gould School of Law ( email )

699 Exposition Boulevard
Los Angeles, CA 90089
United States

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