Major European countries have recently adopted bankruptcy codes that strengthen entrepreneurs’ power to renegotiate outstanding liabilities. Renegotiation in bankruptcy allows lenders to increase recovery rates, however it also weakens the contract’s ability to solve the moral hazard problem embedded in the production project. Hinging on this trade-off, I show in which circumstances a soft bankruptcy law that resembles Chapter 11 in the balance of lenders’ and entrepreneur’s rights encourages the choice of investments that privilege the achievement of long-term results. However, I also show that, in contrast to the common wisdom, soft bankruptcy can lead to the choice of investments that are biased towards the achievement of short-term outcomes.
|Titolo:||Bankruptcy Law and Corporate Investment Decisions|
|Data di pubblicazione:||2013|
|Appare nelle tipologie:||01.1 - Articolo su rivista (Article)|
File in questo prodotto:
|Tarantino_Bankruptcy law_2013.pdf||Versione dell'editore||DRM non definito||Administrator|