On November 14, 2022, FTX, the third largest crypto exchange in the world, filed for bankruptcy. Since then, the company, its many affiliates, and its 30-year-old owner and founder, Sam Bankman-Fried, have been investigated by lawmakers and regulators across many …

Responses to financial crises can have the unfortunate effect of creating “zombie” firms, companies whose operating profits are insufficient to cover their debt service. These companies would probably have gone bankrupt without the forbearance of banks or regulators or other …

Among those who study corporate financial distress and reorganization, the notion that senior lenders are in control is deeply ingrained. Celebrated papers in the law and corporate finance literatures attribute lender influence during periods of distress to blue-sky contracting practices.…

Distressed firms may avoid an otherwise beneficial Chapter 11 reorganization because they fear losing customers.  In our recent paper, we use two experiments to estimate the effect of corporate bankruptcy on consumer demand for a bankrupt firm’s products. We …

Corporate creditors, perhaps like Americans generally, like to think of themselves as rugged individuals who also work within a communal system.  The fundamental tension is clearest at the point of default: Too much individuality, and a small minority of creditors …

In a recent essay, Shocking Business Bankruptcy Law, I discuss how crisis is used strategically to push legal boundaries in large chapter 11 cases in ways that are not readily reversed. I focus primarily on two phenomena. The first …

Sitting as courts of equity, bankruptcy judges have embraced an exceptionalist role whereby they exercise widespread discretion in deciding cases. The doctrine of equitable subordination epitomizes bankruptcy exceptionalism and its potential for market distortion.

The doctrine originated as a remedial …

The United States Bankruptcy Code gives debtors wide discretion to reorganize in the venue of their choice. These lenient venue selection rules long have allowed bankruptcy courts in the District of Delaware and the Southern District of New York to …

A recent report by KPMG [1] on the behavior of chief executive officers (CEOs) suggests that 67 percent of UK CEOs trust their intuition over data. The impact of intuition may become problematic if it is driven by biased perception. …

In a new paper, we explain that variation in prospective liquidity in an industry or economy prompts changes in corporate lending and banking, including changes in the level of corporate borrowing, the type of debt contracts issued, the covenants contained …

In the spring of 2020, as the Covid-19 pandemic shut down economies around the world, pressure arose for governments to respond to the growing threat of pandemic-related market distress. In the United States, the initial proposals for government action varied …

The U.S. experienced an unprecedented number of home foreclosures during the Great Recession of 2007-2009. To limit defaults and deadweight losses, the government implemented various policies that reduced monthly payments by homeowners (i.e., Home Affordable Modification Program) and facilitated mortgage …