Business Stealing And Bankruptcy
- Topics:
- Bankruptcy,
- Taxes
- Tags:
- Bankruptcy,
- Business Operations,
- Industry,
- Litigation,
- Management,
- Strategy,
- University Of Cincinnati
- Source:
- University of Cincinnati
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Overview: Increased competition does not necessarily raise welfare when firms incur entry costs. Bankruptcy courts have a role in discouraging overinvestment by their enforcement of financial contracts. The courts can move a homogenous goods industry closer to the social optimum by lowering the debt capacity and thereby increasing the taxable income of potential entrants. Further, this is the first paper to show that, when industry conditions are stable, firms have weakly insufficient incentives to exit in the homogenous goods case. In this paper, bankruptcy courts can sometimes increase ex post social surplus by shutting down positive net present value firms.
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Format: PDF | Size: 183KB | Date: Jan 2006 | Pages: 59
