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What Drives Bankruptcy Forum Shopping? Evidence from Market Data

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  • Jared A. Ellias

Abstract

Over the past 30 years, the majority of large firms that filed for bankruptcy did so in the US bankruptcy courts of the Southern District of New York and Delaware. Some believe these experienced courts dominate because their expertise makes bankruptcy more predictable. Critics dispute this explanation, arguing instead that "predictability" is a cloak for the true, self-interested motivation of the debtor's managers, lawyers, and senior creditors who influence the debtor's choice of venue. In this paper, I look for evidence supporting the views of the proponents and detractors of bankruptcy forum shopping in a large sample of market data. My results suggest that the market is better at predicting the outcomes of bankruptcy cases in New York and Delaware, consistent with the hypothesis that the law there is more predictable. I do not find evidence supporting the view that those courts are biased in favor of senior creditors.

Suggested Citation

  • Jared A. Ellias, 2018. "What Drives Bankruptcy Forum Shopping? Evidence from Market Data," The Journal of Legal Studies, University of Chicago Press, vol. 47(1), pages 119-149.
    • Handle: RePEc:ucp:jlstud:doi:10.1086/698417
    DOI: 10.1086/698417
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    Cited by:

    1. Benito Arruñada, 2021. "Interpretación positiva del derecho concursal español y propuestas para una reforma equilibrada," Policy Papers 2021-08, FEDEA.
    2. Ganglmair, Bernhard & Helmers, Christian & Love, Brian J., 2024. "Do judicial assignments matter? Evidence from random case allocation," ZEW Discussion Papers 24-003, ZEW - Leibniz Centre for European Economic Research.
    3. Jairaj Gupta & Mariachiara Barzotto & André Aroldo Freitas De Moura, 2024. "Bankruptcy Resolution: Misery or Strategy," Abacus, Accounting Foundation, University of Sydney, vol. 60(3), pages 665-708, September.
    4. Kris Boudt & Florencio López-de-Silanes & Rafael Matta & Shilin Zhang, 2024. "Pro-Debtor Bias, Court Shopping, and Bankruptcy Outcomes," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 24/1088, Ghent University, Faculty of Economics and Business Administration.

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