Norms in Private Bankruptcy: The 'London Approach' to the Resolution of Financial Distress

University of Cambridge ESRC Working Paper No. 173

50 Pages Posted: 6 Feb 2001

See all articles by John Armour

John Armour

University of Oxford - Faculty of Law; University of Oxford - Said Business School; European Corporate Governance Institute (ECGI)

Simon Deakin

University of Cambridge - Centre for Business Research (CBR); European Corporate Governance Institute (ECGI); University of Cambridge - Faculty of Law

Date Written: September 2000

Abstract

In recent years law and economics scholarship has expanded its frame of reference to incorporate the role of social norms in shaping the incentives of actors. This shift in perspective has yet to filter through to the literature on bankruptcy, which has to date concentrated on the role of legal rules in resolving financial distress. This paper presents qualitative findings on how financial distress is resolved amongst creditors of large UK firms. Such restructurings proceed according to an informal set of market norms known collectively as the "London Approach." The paper suggests that regulatory pressure applied by the Bank of England may have been critical in "seeding" the market norms. It also examines the prospects for the London Approach's future in light of changes in the financial environment brought about by globalisation. The paper points the way towards an incorporation into bankruptcy scholarship of the role played by social norms.

Keywords: Social norms, corporate bankruptcy, London Approach, norm seeding

JEL Classification: G330, G380, K220, Z130

Suggested Citation

Armour, John and Deakin, Simon F., Norms in Private Bankruptcy: The 'London Approach' to the Resolution of Financial Distress (September 2000). University of Cambridge ESRC Working Paper No. 173. Available at SSRN: https://ssrn.com/abstract=258615 or http://dx.doi.org/10.2139/ssrn.258615

John Armour (Contact Author)

University of Oxford - Faculty of Law ( email )

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University of Oxford - Said Business School ( email )

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European Corporate Governance Institute (ECGI) ( email )

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Simon F. Deakin

University of Cambridge - Centre for Business Research (CBR) ( email )

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Cambridge, CB2 1AG
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+ 44 1223 335243 (Phone)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

University of Cambridge - Faculty of Law ( email )

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