Avoidance Powers and Incentives to File for Bankruptcy*
- Authors
- Kim, Jeong-Yoo; Joo, Sang Lyong
- Issue Date
- Aug-2010
- Publisher
- WILEY-BLACKWELL
- Keywords
- Avoidance powers; Bankruptcy law; Chapter 7; Chapter 11; Liquidation; G33
- Citation
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, v.39, no.4, pp.445 - 458
- Journal Title
- ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES
- Volume
- 39
- Number
- 4
- Start Page
- 445
- End Page
- 458
- URI
- https://scholarworks.bwise.kr/hongik/handle/2020.sw.hongik/20745
- DOI
- 10.1111/j.2041-6156.2010.01017.x
- ISSN
- 2041-9945
- Abstract
- In this paper, we examine the incentives for a failing debtor and creditors to file for bankruptcy either under Chapter 7 or Chapter 11, and discuss whether avoidance powers can provide proper incentives to file. We show that if the future profitability of a failing firm is known, avoidance powers can eliminate an inefficient delay in bankruptcy filing. However, if profitability is uncertain, in particular, if a creditor is pessimistic, what might result is an inefficient rush to file under Chapter 7. We also demonstrate that the conditional avoidance powers can give creditors a stronger incentive to gather information pertinent to future profitability, thereby enhancing efficiency.
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Collections - College of Business Management > Finance and Insurance Major > 1. Journal Articles
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