caa a22 4500 388047690 CHVBK 20180307125042.0 cr unu---uuuuu 161130e199812 xx s 000 0 eng 10.2307/2331127 doi S0022109000001022 pii (NATIONALLICENCE)cambridge-10.2307/2331127 The Design of Bankruptcy Law: A Case for Management Bias in Bankruptcy Reorganizations [Elektronische Daten] In an incomplete contracting environment, bankruptcy is considered to be a renegotiation of the firm's financial contracts. An optimal bankruptcy law is derived as optimal restrictions on the environment within which the claimants to a distressed firm bargain. The law is used as a commitment device to ensure actions that are ex ante optimal but not subgame perfect. We show that the bankruptcy court can use two types of mechanisms to implement the optimal bankruptcy outcome: direct restrictions on the bargaining game between the claimants, and the use of a "restricted auction.” In both cases, the restrictions prevent the strategic use of bankruptcy by firms not in financial distress, provide for truthful revelation of information so that distress results in an ex post efficient allocation of resources, and establish a bias toward the manager in reorganizations that provides correct ex ante decision making incentives. Copyright © School of Business Administration, University of Washington 1998 Berkovitch Elazar Tel Aviv University, Tel Aviv, Israel Israel Ronen University of Michigan, School of Business Administration, 701 Tappan St., Ann Arbor, MI 48109 Zender Jaime F. University of Utah, David Eccles School of Business, Salt Lake City, UT 84112 Journal of Financial and Quantitative Analysis Cambridge University Press 33/4(1998-12), 441-464 0022-1090 33:4<441 1998 33 JFQ https://doi.org/10.2307/2331127 text/html Onlinezugriff via DOI 1 research-article jats NATIONALLICENCE 856 40 https://doi.org/10.2307/2331127 text/html Onlinezugriff via DOI NATIONALLICENCE 700 1- Berkovitch Elazar Tel Aviv University, Tel Aviv, Israel NATIONALLICENCE 700 1- Israel Ronen University of Michigan, School of Business Administration, 701 Tappan St., Ann Arbor, MI 48109 NATIONALLICENCE 700 1- Zender Jaime F. University of Utah, David Eccles School of Business, Salt Lake City, UT 84112 NATIONALLICENCE 773 0- Journal of Financial and Quantitative Analysis Cambridge University Press 33/4(1998-12), 441-464 0022-1090 33:4<441 1998 33 JFQ CC0 http://creativecommons.org/publicdomain/zero/1.0 nationallicence BK010053 XK010053 XK010000 NATIONALLICENCE NATIONALLICENCE NL-cambridge