TY  - JOUR
AU  - Aghion,Philippe
AU  - Hart,Oliver
AU  - Moore,John
TI  - The Economics of Bankruptcy Reform
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4097
PY  - 1992
Y2  - June 1992
UR  - http://www.nber.org/papers/w4097
L1  - http://www.nber.org/papers/w4097.pdf
N1  - Author contact info:
Philippe Aghion
Department of Economics
Harvard University
1805 Cambridge St
Cambridge, MA 02138
Tel: 617/495-6675
Fax: 617/495-4341
E-Mail: paghion@fas.harvard.edu

Oliver D. Hart
Department of Economics
Littauer Center 220
Harvard University
Cambridge, MA 02138
Tel: 617/496-3461
Fax: 617-495-7730
E-Mail: ohart@harvard.edu

John Moore
William Robertson Building
Edinburgh
Scotland, EH8 9JY
U.K.
E-Mail: j.h.moore@ed.ac.uk
M1  - published as Philippe Aghion, Oliver D. Hart, John Moore. "The Economics of Bankruptcy Reform," in Olivier Blanchard, Kenneth Froot, Jeffrey Sachs, eds., "The Transition in Eastern Europe, Volume 2: Restructuring" University of Chicago Press (1994)

AB  - We propose a new bankruptcy procedure. Initially, a firm's debts are cancelled, and cash and non-cash bids are solicited for the 'new" (all-equity) firm. Former claimants are given shares, or options to buy shares, in the new firm on the basis of absolute priority. Options are exercised once the bids are in. Finally, a shareholder vote is taken to select one of the bids. In essence, our procedure is a variant on the U.S. Chapter 7, in which non-cash bids are possible; this allows for reorganization. We believe our scheme is superior to Chapter 11 since it is simpler, quicker, market-based, avoids conflicts, and places appropriate discipline on management.
ER  -