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European Journal of Law and Economics

, Volume 24, Issue 3, pp 201–214 | Cite as

Theoretical foundation for a debtor friendly bankruptcy law in favour of creditors

  • Philippe Frouté
Article

Abstract

Although many works support creditor friendly bankruptcy laws, an evolution towards debtor friendly systems is at work. This paper proposes a theoretical ground to meet this paradox. It reconsiders the economic role of bankruptcy law by stressing on the courts’ production of information. It reveals that the transmission of a lenient signal by judges makes it possible to reduce the hazard that bad risks seek to avoid going on trial. Thus, it shows that debtor friendly bankruptcy laws are not systematically opposed to creditors’ interests. They reduce the risk of the economy and contribute to the improvement of the global efficiency.

Keywords

Law and economics Bankruptcy law Judges 

JEL Classifications

D82 G33 K41 

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Copyright information

© Springer Science+Business Media, LLC 2007

Authors and Affiliations

  1. 1.Centre d’Économie de la SorbonneMATISSE, CNRS et Université Paris 1, Programme Doctoral ESSECParis Cedex 13France

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