Abstract
This
essay surveys the literature on Chapter 11. I start by discussing
the objectives by which the performance of corporate reorganization
rules is to be judged and then consider the fundamental problem of
valuation that arises in corporate reorganization. I next turn to
examine the performance of the prevailing bargaining-based approach
to reorganization, both in terms of its effect on total reorganization
value and in terms of its effect on the division of this value. Finally,
I examine the two alternative approaches that have been put forward
to the approach of existing rules -- that of auctioning the reorganized
company's asset (put forward by Baird (1986) and Jensen (1991) and
that of using options to reorganize the company's ownership (put forward
by Bebchuk (1988)).
