Premium
Bankruptcy Claims Trading
Author(s) -
Ellias Jared A
Publication year - 2018
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/jels.12204
Subject(s) - bankruptcy , negotiation , debt , corporate governance , business , bond , economics , financial economics , finance , political science , law
A robust secondary market has emerged over the past 20 years in the debt of Chapter 11 firms. Critics worry that the trading associated with this market has undermined bankruptcy governance by forcing managers to negotiate with shifting groups of activist investors in the Chapter 11 bargaining process. This article investigates whether this is a common problem and concludes that it is not. Although trading of bond debt is pervasive, the activist groups that tend to participate in negotiations usually enter cases early and rarely change significantly. Trading in general, therefore, does not appear to have the impact on governance that many claims trading critics fear, at least insofar as the average case is concerned.