The Real Effects of Bankruptcy Forum Shopping

59 Pages Posted: 13 Dec 2024

See all articles by Samuel Antill

Samuel Antill

Harvard Business School

Aymeric Bellon

University of North Carolina (UNC) at Chapel Hill - Finance Area

Date Written: December 11, 2024

Abstract

Many non-Delaware firms strategically file for bankruptcy in Delaware. Should this "forum shopping" be allowed? This question has motivated six congressional bill proposals over decades of policy debate. Using a novel natural experiment and Census-Bureau microdata, we inform this debate. Comparing observably similar firms within a Delaware-adjacent state, we show that physical proximity to Delaware predicts forum shopping. Instrumenting with proximity, we find that forum shopping causally: (i) prevents closures and liquidations, (ii) shortens bankruptcies, (iii) boosts creditor recovery, and (iv) increases post-bankruptcy employment by 62%. Proximity to Delaware is uncorrelated with pre-bankruptcy employment trends, validating the exclusion restriction.

Keywords: corporate bankruptcy, law and finance, forum shopping, venue selection, financial distress

JEL Classification: G33, G38, G34, K22

Suggested Citation

Antill, Samuel and Bellon, Aymeric, The Real Effects of Bankruptcy Forum Shopping (December 11, 2024). Available at SSRN: https://ssrn.com/abstract=5052176 or http://dx.doi.org/10.2139/ssrn.5052176

Samuel Antill (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Aymeric Bellon

University of North Carolina (UNC) at Chapel Hill - Finance Area ( email )

University of North Carolina (UNC) at Chapel Hill
Chapel Hill, NC 27599-3490
United States

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