A Team Production Theory of Bankruptcy Reorganization

45 Pages Posted: 12 May 2003  

Lynn M. LoPucki

University of California, Los Angeles (UCLA) - School of Law

Date Written: April 23, 2003

Abstract

This paper extends Professor Margaret Blair and Lynn Stout's pathbreaking Team Production Theory of Corporate Law to the bankruptcy reorganization of public companies. The paper begins by describing the prevailing contractarian theory of bankruptcy reorganization, the Creditors' Bargain theory propounded by Professor Thomas Jackson in 1982. The paper briefly describes the Team Production Theory of Corporate Law and then projects the consequences of that theory for the firm in bankruptcy. The final part of the paper compares the Team Production Theory of Bankruptcy Reorganization with the Creditors' Bargain theory, reaching two conclusions. First, the Team Production Theory of Bankruptcy Reorganization describes the bankruptcy system more accurately than does the Creditors' Bargain theory. Second, if the empirical assumptions underlying the Team Production Theory of Corporate Law theory are accurate, the ex ante maximization recommended by the Team Production Theory of Bankruptcy Reorganization will better serve the goal of economic efficiency than the ex post maximization recommended by the Creditors' Bargain theory.

Keywords: bankruptcy, bankruptcy reorganization, reorganization, creditors' bargain, team production, public companies, public corporations, externalization, board of directors, shareholder primacy, director primacy

JEL Classification: G33, D23, G34, K12, K22, L51

Suggested Citation

LoPucki, Lynn M., A Team Production Theory of Bankruptcy Reorganization (April 23, 2003). UCLA School of Law, Law & Econ Research Paper No. 3-12. Available at SSRN: https://ssrn.com/abstract=397801 or http://dx.doi.org/10.2139/ssrn.397801

Lynn M. LoPucki (Contact Author)

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
United States
(310) 794-5722 (Phone)

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