Knowing is Power: The Value of Judge-Lawyer Familiarity

62 Pages Posted: 18 Aug 2020 Last revised: 10 Jan 2022

See all articles by Vidhan K. Goyal

Vidhan K. Goyal

Hong Kong University of Science & Technology (HKUST) - Department of Finance; HKUST; Hong Kong University of Science & Technology (HKUST) - Department of Finance

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management

Wei Wang

Queen's University - Smith School of Business

Date Written: June 16, 2021

Abstract

Does familiarity matter? We exploit a setting where lead counsel lawyers are selected before judge assignment in corporate bankruptcies and find that cases resolve 25% faster when a judge-lawyer connection exists. The most effective connections arise through previous in-court interactions where lawyers gain first-hand knowledge of judges' preferences. Firms also incur lower legal fees and their creditors recover more when a connection exists. Judges exhibit no preferential bias toward connected firms. Given restricted private communication between lawyers and judges, our paper highlights a new mechanism whereby connections create value: non-transferable knowledge of idiosyncratic preferences.

Keywords: network, preferences, lawyers, Chapter 11, corporate bankruptcy, law firms, judges

JEL Classification: G14, G15, G32

Suggested Citation

Goyal, Vidhan K. and Goyal, Vidhan K. and Madsen, Joshua and Wang, Wei, Knowing is Power: The Value of Judge-Lawyer Familiarity (June 16, 2021). HKUST Business School Research Paper No. 2020-019, Available at SSRN: https://ssrn.com/abstract=3666263 or http://dx.doi.org/10.2139/ssrn.3666263

Vidhan K. Goyal

HKUST ( email )

Clear Water Bay
Kowloon
Hong Kong
23587678 (Phone)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong
852-2358-7678 (Phone)
852-2358-1749 (Fax)

HOME PAGE: http://www.vidhangoyal.com

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong
852-2358-7678 (Phone)
852-2358-1749 (Fax)

HOME PAGE: http://www.vidhangoyal.com

Joshua Madsen

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

Wei Wang (Contact Author)

Queen's University - Smith School of Business ( email )

Queen's University-Smith School of Business
143 Union Street
Kingston, Ontario K7L 3N6
Canada

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