Seminar - Insolvency, Restructuring, and Control
Research, Friday seminars
Ashwini Agrawal - London School of Economics
2017-11-24 at 10:15
2017-11-24 at 11:45
Swedish House of Finance, Drottninggatan 98, 4th floor, Stockholm
We use Danish administrative data to measure the effects of a significant reform to Denmark’s corporate bankruptcy code. In 2010, the Danish government restricted the control rights of debtors during restructuring proceedings with creditors. Following the passage of the reform, we observe a sharp reduction in the monthly frequency of firm liquidations; the data reject the commonly held view that constricting debtor “breathing room” increases the incidence of liquidation. Instead, we find evidence that supports an incomplete contracting model of restructuring rules. The findings inform debate over Ch. 11-style reforms currently being considered by the European Union.