The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Bankruptcy, Economics of

  • Arturo Bris
Reference work entry


Bankruptcy is the formal procedure to resolve the disputes among creditors, shareholders, and managers of a company in financial distress. Countries have designed bankruptcy procedures that differ in the control that is given to the existing management relative to creditors. These differences determine the incentives that are given to the parties before, during, and after the bankruptcy proceedings. They also determine how expensive the bankruptcy process is. Ultimately, bankruptcy costs are borne by firms’ shareholders.


Absolute priority rule (APR) Administrative receiverships Bankruptcy Bankruptcy law Bankruptcy, economics of Chapter 11 reorganizations Chapter 7 liquidations (USA) Default Liquidations Workouts 

JEL Classification

K3 K35 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Arturo Bris
    • 1
  1. 1.