Publication detail

What Drives the Optimal Bankruptcy Law Design?

Author(s): PhDr. Ondřej Vychodil , M.A., Ondřej Knot
Type: IES Working Papers
Year: 2004
Number: 62
ISSN / ISBN:
Published in: IES WP 2004/62
Publishing place: Prague
Keywords: bankruptcy, capital and ownership structure, ex-ante and ex-post efficiency, asymmetric information, moral hazard, judicial corruption
JEL codes:
Suggested Citation:
Abstract: The extensive economic research of bankruptcy within the last decade has made many issues connected with bankruptcy legislation much clearer but there is still a large area of disagreement about how an optimal bankruptcy law should look like. At the same time, the actual bankruptcy laws in various countries differ substantially and there is an agreement that there is no one-size-fits-all solution. This paper sets stage for the debate about the optimal bankruptcy law design in the Czech Republic. It shows what problems arise in connection with bankruptcy, what methods can be used to solve them, and what are the trade-offs faced by the use of individual methods. First, the question why bankruptcy legislation is needed at all is answered. Further, three mutually intersecting approaches to the determinants of optimal bankruptcy law design are presented: concepts of ex-post and ex-ante efficiency, principal-agent theory view, and the emphasis on judicial corruption problems within different bankruptcy designs.
Downloadable: WP 62
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