Why CEOs File Bankruptcy in Delaware
27 Pages Posted: 27 Jun 2007
Date Written: August 2007
During the 1990s Delaware received more large bankruptcy filings than the six next most active bankruptcy courts combined. Interestingly, firms reorganized in Delaware perform more poorly than firms reorganized elsewhere raising the important question of why so many managers choose to file in a venue where the firm is likely to be sub-optimally reorganized and perform more poorly upon emergence. One reason for the increased filings is that CEOs who file in Delaware significantly improve their career prospects relative to CEOs who file elsewhere.
Keywords: Bankruptcy, Delaware, agency theory
JEL Classification: G33, G38
Suggested Citation: Suggested Citation