Coase-Sandor Working Paper Series in Law and Economics
Publication Date
2013
Publication Title
Law & Economics Working Papers
Abstract
The voting rules in Chapter 11 are supposed to ensure that debtor firms are appropriately liquidated or reorganized. However, these convoluted and internally inconsistent rules are poorly designed to produce such outcomes, and there is no evidence that they do. However, the major proposals for reform, including auctions and options-trading, neglect the fundamentally collective nature of choices in reorganizations. We argue that a more appealing reform is the improvement of voting rules through the use of an economically efficient procedure known as quadratic voting, according to which stakeholders may cast a number of votes equal to the square root of the liquidation value of their claims. We discuss how quadratic voting could be implemented through reform of Chapter 11 and the advantages it would bring.
Number
653
Recommended Citation
Eric Posner & E. Glen Weyl, "A Solution to the Collective Action Problem in Corporate Reorganization" (Coase-Sandor Institute for Law & Economics Working Paper No. 653, 2013).
Additional Information
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