february, 2019

12feb12:00 pm1:15 pmKarsten MuellerBusy Bankruptcy Courts and the Cost of CreditEvent:Student Research Workshop

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Event Details

Abstract: How large are the welfare losses from inefficient courts? This paper studies the effect of judicial efficiency in the context of credit contracts in the United States. Using the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 as an exogenous shock to the caseload of bankruptcy courts, I show that debt enforcement is a quantitatively important factor for credit spreads and contract maturities. Consistent with higher expected recovery values for creditors, the effect is driven by firms with higher bankruptcy risk and lower expected liquidation values. I use my estimates to approximate the US-wide costs of bankruptcy court backlog and fiscal multipliers for new bankruptcy judges. This approach also uncovers the bankruptcy districts with the highest social returns on new judgeships.

 

Time

(Tuesday) 12:00 pm - 1:15 pm

Location

Bendheim Center for Finance Room 101

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