Security interests and bankruptcy priorities: A review of current theories
- Creators
- Schwartz, Alan
Abstract
In recent years, finance economists have begun to study several practices that the law traditionally regulates. Examples include attempted explanations of the variety of debt and equity instruments that firms issue, the nature of bond covenants, the functions that trade credit serves and the likely actions of creditors when their debtor becomes insolvent. These studies are illuminating and provocative, but represent only the beginning of coherent explanations of the phenomena. Also, the normative implications of this relatively incomplete understanding have been unexplored. Lawyers assume these financial practices to be well understood and, consequently, have erected regulatory structures that presuppose the truth of what now seem preliminary or questionable positivist theories. This paper explores a particular financial practice-the issuance of debt secured by personal property--and a regulatory scheme relevant to this practice--the setting of distributional priorities when an insolvent firm is liquidated. My principal purpose is to illuminate the unresolved problems in this field and to illustrate the relevance of the achievements and unaccomplished tasks of modern finance to areas of business law that have developed largely independently of this discipline.
Additional Information
© 1981 The University of Chicago Press. I would like to thank John Borgo, David Carroll, Robert Forsythe, Michael J. Graetz, Thomas H. Jackson, Anthony T. Kronman, George L. Priest, Robert E. Scott, Matthew Spitzer, James Strnad and Louis L. Wilde for very helpful suggestions. This paper also benefited substantially from comments received at the Law and Economics Workshop at the University of Chicago and the University of Southern California Faculty Workshop. Portions of this paper will appear in revised form in Alan Schwartz & Robert E. Scott, Commercial Law: Principles and Policies (forthcoming). Formerly SSWP 334.Attached Files
Published - sswp334_-_published.pdf
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Additional details
- Eprint ID
- 83325
- Resolver ID
- CaltechAUTHORS:20171117-165014965
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2017-11-20Created from EPrint's datestamp field
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2021-11-15Created from EPrint's last_modified field