Biased Judges? Judge Characteristics and Bankruptcy Outcomes

Abstract

Exploiting random assignment of judges to corporate bankruptcy filings, I examine the effect of judge characteristics on outcomes. First, I find that cases assigned to judges who grew up during the Great Depression are more likely to emerge from bankruptcy, whereas those assigned to judges with economics training and conservative political ideology are less likely to. Second, I show that the case duration is shorter (longer) when the potential case outcome is consistent (inconsistent) with judges' preferences. Third, the judge characteristics do not correlate with post-emergence outcomes. Overall, the findings suggest that the effect of judge characteristics may be concentrated in marginal cases where the economic benefits of liquidation versus emergence are not significantly different.

Keywords: Corporate bankruptcy, bankruptcy judge, judicial bias, personal experience

JEL Classification: G33, G34, K40