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Ex-ante efficiency of bankruptcy procedures

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  • Cornelli, Francesca
  • Felli, Leonardo

Abstract

This paper suggests a framework to analyze the efficiency properties of bankruptcy procedures, distinguishing between ex-ante and ex-post efficiency. Ex-post efficiency consists in maximizing the ex-post value of the insolvent firm, whereas ex-ante efficiency consists in maximizing the proceeds to creditors from the reorganization of the firm and providing incentives for the creditors to monitor the firm. We show that the definition of creditors rights over the company and the protection of the creditors' seniority, are crucial to asses the ex-ante efficiency of a bankruptcy procedure.
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Suggested Citation

  • Cornelli, Francesca & Felli, Leonardo, 1997. "Ex-ante efficiency of bankruptcy procedures," European Economic Review, Elsevier, vol. 41(3-5), pages 475-485, April.
    • Handle: RePEc:eee:eecrev:v:41:y:1997:i:3-5:p:475-485
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    More about this item

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill

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