Theoretical foundation for a debtor friendly bankruptcy law in favour of creditors |
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Authors: | Philippe Frouté |
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Institution: | 1.Centre d’économie de la Sorbonne,MATISSE, CNRS et Université Paris 1,
Programme Doctoral ESSEC,Paris Cedex 13,France |
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Abstract: | Although many works support creditor friendly bankruptcy laws, an evolution towards debtor friendly systems is at work. This
paper proposes a theoretical ground to meet this paradox. It reconsiders the economic role of bankruptcy law by stressing
on the courts’ production of information. It reveals that the transmission of a lenient signal by judges makes it possible
to reduce the hazard that bad risks seek to avoid going on trial. Thus, it shows that debtor friendly bankruptcy laws are
not systematically opposed to creditors’ interests. They reduce the risk of the economy and contribute to the improvement
of the global efficiency.
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Keywords: | Law and economics Bankruptcy law Judges |
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