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Explaining Deviations from Absolute Priority Rules in Bankruptcy
Author(s) -
Carapeto Maria
Publication year - 2006
Publication title -
journal of empirical legal studies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.529
H-Index - 24
eISSN - 1740-1461
pISSN - 1740-1453
DOI - 10.1111/j.1740-1461.2006.00079.x
Subject(s) - bankruptcy , debtor , absolute (philosophy) , economics , econometrics , absolute deviation , least absolute deviations , bargaining power , actuarial science , mathematics , microeconomics , regression , statistics , debt , finance , creditor , philosophy , epistemology
This article provides a classification of the reasons behind deviations from absolute priority (DAPs) in Chapter 11 bankruptcies and tests several explanations using a regression approach. DAPs seem to be best explained by two main reasons, a recontracting process and bargaining power of the debtor. The introduction of nonlinearities in the analysis provides some conditional support for two other reasons—asymmetric information and complexity of the cases. The study found no backing for an alternative reason, the bankruptcy venue. Even though DAPs are present in most Chapter 11 cases, the results show that their magnitude has been decreasing over time.