Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures
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 creditor...
| Published in: | Business Research |
|---|---|
| Main Authors: | , |
| Format: | Article |
| Language: | English |
| Published: |
Springer
2017-06-01
|
| Subjects: | |
| Online Access: | http://link.springer.com/article/10.1007/s40685-017-0047-x |
| _version_ | 1852769100798885888 |
|---|---|
| author | Matthias Frieden Stefan Wielenberg |
| author_facet | Matthias Frieden Stefan Wielenberg |
| author_sort | Matthias Frieden |
| collection | DOAJ |
| container_title | Business Research |
| description | 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. |
| format | Article |
| id | doaj-art-e431dbb1d7e34e53acd8d2f7f1edc29f |
| institution | Directory of Open Access Journals |
| issn | 2198-3402 2198-2627 |
| language | English |
| publishDate | 2017-06-01 |
| publisher | Springer |
| record_format | Article |
| spelling | doaj-art-e431dbb1d7e34e53acd8d2f7f1edc29f2025-08-19T20:52:36ZengSpringerBusiness Research2198-34022198-26272017-06-0110215918710.1007/s40685-017-0047-xInsolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy proceduresMatthias Frieden0Stefan Wielenberg1Department of Economics, Leibniz-University HanoverDepartment of Economics, Leibniz-University HanoverAbstract 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.http://link.springer.com/article/10.1007/s40685-017-0047-xBankruptcyInsolvency administratorCreditorIncentivesCompensation |
| spellingShingle | Matthias Frieden Stefan Wielenberg Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures Bankruptcy Insolvency administrator Creditor Incentives Compensation |
| title | Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures |
| title_full | Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures |
| title_fullStr | Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures |
| title_full_unstemmed | Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures |
| title_short | Insolvency administrator’s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures |
| title_sort | insolvency administrator s incentives and the tradeoff between creditor satisfaction and efficiency in bankruptcy procedures |
| topic | Bankruptcy Insolvency administrator Creditor Incentives Compensation |
| url | http://link.springer.com/article/10.1007/s40685-017-0047-x |
| work_keys_str_mv | AT matthiasfrieden insolvencyadministratorsincentivesandthetradeoffbetweencreditorsatisfactionandefficiencyinbankruptcyprocedures AT stefanwielenberg insolvencyadministratorsincentivesandthetradeoffbetweencreditorsatisfactionandefficiencyinbankruptcyprocedures |