Details
| Original language | English |
|---|---|
| Pages (from-to) | 159-187 |
| Number of pages | 29 |
| Journal | Business Research |
| Volume | 10 |
| Issue number | 2 |
| Early online date | 3 Jun 2017 |
| Publication status | Published - Oct 2017 |
Abstract
An insolvency administrator replaces the manager of an insolvent firm to devise and organize a liquidation or reorganization plan in the creditors’ interest. In the course of the process, the insolvency administrator presents the most favourable option from his perspective, and the creditors choose to accept or reject this plan. Conflicts of interest arise because the insolvency administrator, as the better-informed party, considers in his proposal liability risks and reputational issues that are beyond the creditors’ scope. We model this conflict as a Bayesian game and find that, under those compensation schemes typically used in real-world regulations, optimal creditor satisfaction and efficient decisions concerning the economic future of the insolvent firm will never be achieved simultaneously.
Keywords
- Bankruptcy, Compensation, Creditor, Incentives, Insolvency administrator
ASJC Scopus subject areas
- Business, Management and Accounting(all)
- Business, Management and Accounting (miscellaneous)
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In: Business Research, Vol. 10, No. 2, 10.2017, p. 159-187.
Research output: Contribution to journal › Article › Research › peer review
}
TY - JOUR
T1 - Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures
AU - Frieden, Matthias
AU - Wielenberg, Stefan
PY - 2017/10
Y1 - 2017/10
N2 - An insolvency administrator replaces the manager of an insolvent firm to devise and organize a liquidation or reorganization plan in the creditors’ interest. In the course of the process, the insolvency administrator presents the most favourable option from his perspective, and the creditors choose to accept or reject this plan. Conflicts of interest arise because the insolvency administrator, as the better-informed party, considers in his proposal liability risks and reputational issues that are beyond the creditors’ scope. We model this conflict as a Bayesian game and find that, under those compensation schemes typically used in real-world regulations, optimal creditor satisfaction and efficient decisions concerning the economic future of the insolvent firm will never be achieved simultaneously.
AB - An insolvency administrator replaces the manager of an insolvent firm to devise and organize a liquidation or reorganization plan in the creditors’ interest. In the course of the process, the insolvency administrator presents the most favourable option from his perspective, and the creditors choose to accept or reject this plan. Conflicts of interest arise because the insolvency administrator, as the better-informed party, considers in his proposal liability risks and reputational issues that are beyond the creditors’ scope. We model this conflict as a Bayesian game and find that, under those compensation schemes typically used in real-world regulations, optimal creditor satisfaction and efficient decisions concerning the economic future of the insolvent firm will never be achieved simultaneously.
KW - Bankruptcy
KW - Compensation
KW - Creditor
KW - Incentives
KW - Insolvency administrator
UR - http://www.scopus.com/inward/record.url?scp=85058352424&partnerID=8YFLogxK
U2 - 10.1007/s40685-017-0047-x
DO - 10.1007/s40685-017-0047-x
M3 - Article
AN - SCOPUS:85058352424
VL - 10
SP - 159
EP - 187
JO - Business Research
JF - Business Research
SN - 2198-3402
IS - 2
ER -