The John M. Olin Center

Paper Abstract

227. L. Bebchuk, Chapter 11, 12/97; subsequently published in The New Palgrave Dictionary of Economics and the Law, Peter Newman (ed.), (New York: Stockton Press, 1998), Vol. 1, A-D, 219-224.

Abstract: This essay surveys the literature on Chapter 11. I start by discussing the objectives by which the performance of corporate reorganization rules is to be judged and then consider the fundamental problem of valuation that arises in corporate reorganization. I next turn to examine the performance of the prevailing bargaining-based approach to reorganization, both in terms of its effect on total reorganization value and in terms of its effect on the division of this value. Finally, I examine the two alternative approaches that have been put forward to the approach of existing rules -- that of auctioning the reorganized company's asset (put forward by Baird (1986) and Jensen (1991) and that of using options to reorganize the company's ownership (put forward by Bebchuk (1988)).

227: PDF