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Corporate Ownership Structure and the Evolution of Bankruptcy Law in the US and UK

Author

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  • John Armour
  • B.R. Cheffins
  • D.A. Skeel Jr.

Abstract

The past decade has seen intense academic debates over possible explanations for the different systems of corporate ownership and control that exist in developed economies. Yet the role of bankruptcy as a mechanism of corporate governance has received relatively little attention. Furthermore, many theories have failed to account successfully for events occurring in the UK, notwithstanding its similarity to the US. In response, this paper offers an account of the complementarities between bankruptcy law and ownership structure, which it is argued can explain developments in both the UK and the US. By identifying the effects of concentration or dispersion in firms' capital structure (across both equity and debt), and by analysing implications of these capital structure choices for bankruptcy, the paper develops a richer account of the corporate governance patterns we see in different nations.

Suggested Citation

  • John Armour & B.R. Cheffins & D.A. Skeel Jr., 2002. "Corporate Ownership Structure and the Evolution of Bankruptcy Law in the US and UK," Working Papers wp226, Centre for Business Research, University of Cambridge.
    • Handle: RePEc:cbr:cbrwps:wp226
    Note: PRO-2
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    Cited by:

    1. repec:spo:wpmain:info:hdl:2441/6824 is not listed on IDEAS
    2. von Thadden, Ernst-Ludwig & Perotti, Enrico, 2003. "The Political Economy of Bank and Equity Dominance," CEPR Discussion Papers 3914, C.E.P.R. Discussion Papers.
    3. repec:hal:wpspec:info:hdl:2441/6824 is not listed on IDEAS
    4. Jérôme Sgard, 2006. "On Legal Origins and Brankruptcy Laws: the European Experience (1808-1914)," Working Papers hal-01065660, HAL.
    5. Jérôme Sgard, 2006. "Do legal origins matter? The case of bankruptcy laws in Europe 1808-1914," SciencePo Working papers Main hal-01021354, HAL.
    6. Mr. Patrick Bolton, 2003. "Toward a Statutory Approach to Sovereign Debt Restructuring: Lessons From Corporate Bankruptcy Practice Around the World," IMF Working Papers 2003/013, International Monetary Fund.
    7. John Armour & Simon Deakin & Priya Lele & Mathias Siems, 2009. "How Do Legal Rules Evolve? Evidence from a cross-country Comparison of Shareholder, Creditor and Worker Protection," Working Papers wp382, Centre for Business Research, University of Cambridge.
    8. Couwenberg, Oscar & Lubben, Stephen J., 2013. "Solving creditor problems in the twilight zone: Superfluous law and inadequate private solutions," International Review of Law and Economics, Elsevier, vol. 34(C), pages 61-76.
    9. Jérôme Sgard, 2006. "On Legal Origins and Brankruptcy Laws: the European Experience (1808-1914)," SciencePo Working papers Main hal-01065660, HAL.
    10. repec:spo:wpecon:info:hdl:2441/6824 is not listed on IDEAS
    11. Enrico Perotti & Ernst-Ludwig von Thadden, 2002. "The Political Economy of Bank- and Market Dominance," Cahiers de Recherches Economiques du Département d'économie 02.14, Université de Lausanne, Faculté des HEC, Département d’économie, revised Apr 2003.
    12. Bhattacharjee Arnab & Higson Christopher & Holly Sean & Kattuman Paul, 2009. "Macroeconomic Instability and Corporate Failure: The Role of the Legal System," Review of Law & Economics, De Gruyter, vol. 5(1), pages 1-32, January.
    13. Paolo Di Martino & Michelangelo Vasta, 2010. "Companies' insolvency and ‘the nature of the firm’ in Italy, 1920s–70s1," Economic History Review, Economic History Society, vol. 63(1), pages 137-164, February.
    14. Viral V. Acharya & Krishnamurthy V. Subramanian, 2009. "Bankruptcy Codes and Innovation," The Review of Financial Studies, Society for Financial Studies, vol. 22(12), pages 4949-4988, December.
    15. repec:spo:wpmain:info:hdl:2441/8221 is not listed on IDEAS
    16. repec:spo:wpecon:info:hdl:2441/8221 is not listed on IDEAS
    17. repec:hal:wpspec:info:hdl:2441/8221 is not listed on IDEAS
    18. repec:dau:papers:123456789/13599 is not listed on IDEAS
    19. repec:hal:spmain:info:hdl:2441/6824 is not listed on IDEAS
    20. Armour John & Hsu Audrey Wen-hsin & Walters Adrian, 2012. "The Costs and Benefits of Secured Creditor Control in Bankruptcy: Evidence from the UK," Review of Law & Economics, De Gruyter, vol. 8(1), pages 101-135, May.
    21. Chen, Jie & De Cesari, Amedeo & Hill, Paula & Ozkan, Neslihan, 2018. "Initial compensation contracts for new executives and financial distress risk: An empirical investigation of UK firms," Journal of Corporate Finance, Elsevier, vol. 48(C), pages 292-313.
    22. repec:hal:spmain:info:hdl:2441/8221 is not listed on IDEAS
    23. Jérôme Sgard, 2006. "Do legal origins matter? The case of bankruptcy laws in Europe 1808-1914," Post-Print hal-01021354, HAL.
    24. Simon Deakin, 2013. "The Legal Framework Governing Business Firms & its Implications for Manufacturing Scale & Performance: The UK Experience in International Perspective," Working Papers wp449, Centre for Business Research, University of Cambridge.
    25. Richard A. AJAYI & Luminita ENACHE & Seyed MEHDIAN, 2012. "Resolution Of Financial Distress: A Comparative Analysis Of U.S., U.K., And Japanese Firms," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 10, pages 147-163, December.

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    More about this item

    Keywords

    Bankruptcy; Law and Finance; Ownership Structure; Debt Concentration;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • K22 - Law and Economics - - Regulation and Business Law - - - Business and Securities Law

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