Financial logic and bankers’ institutional entrepreneurship: The politics of the “zombies” debate in bankruptcy proceedings at the Commercial Court of Paris (2000–2005)

Businesses of all kinds usually try as much as they can to participate in the regulation of their own markets. One way to participate in this regulatory activity is to exercise control on State institutions that solve conflicts among economic actors and discipline entrepreneurs. This paper describes a "consular" institution of joint regulation of markets, the Commercial Court of Paris, in which the judges are lay, voluntary consular judges and in which the financial industry reaches extremely high levels of efficiency and sophistication in institutional/judicial entrepreneurship, verging on long term institutional capture. Using in some detail the specific example of bankruptcy proceedings, we look at the ways in which judges who come from the financial industry participate –between 2000 and 2005– in the classical political debate about "feeding the zombies" vs. liquidating companies regardless of consequences for employment. Cultural and ideological positions of financiers are analysed and correlated with their organizational positions within the court, in particular their participation in Chambers dealing with bankruptcies, and their network influence among the other judges of this Court. We use a longitudinal study of advice networks among the 240 lay "consular" judges to describe this influence of financiers via the dissemination of their logic as applied to bankruptcies (technical evaluations, knowledge of boards and markets, and special brand of legal pragmatism). We offer an explanation of why political elites keep allowing the banking industry to exercise such a close control over a first level judicial institution by reconstituting the position of the Commercial Court of Paris in its institutional system and ecology as well as its role of in the financial crisis of the early 1990's –a crisis that involved the bankruptcy of French banks themselves. Finally, we use this case study of bankruptcy-related mechanisms to raise the issue of the protection of public interest in the joint regulation of capitalist economies where business is allowed to participate so extensively in the regulation of the whole economy.