Theoretical foundation for a debtor friendly bankruptcy law in favour of creditors

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.      

The product paradox of voting power

We consider a system made up of two committees, with overlapping membership but with different rules for passing decisions; the passage of a joint resolution requires separate approval by each committee. We show that it is possible for one voter a to be stronger (have greater voting power) than another voter b in both of the two committees, while in the two-committee system (considered as a single composite entity) b is stronger than a. We argue that this apparently paradoxical phenomenon is inherent in the structure of the decision-making system in question, rather than being an artefact of any particular index used to measure voting power.