Are Bankruptcy Professional Fees Excessively High?

• 成果类型: Article; Early Access
• 署名作者: Antill, Samuel
• 署名单位: Harvard University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhae057
• 发表日期: 2024
• 关键词: capital structure; COSTS; MODEL

摘要

Chapter 7 is the most popular bankruptcy system for U.S. firms and individuals. Chapter 7 professional fees are substantial. Theoretically, high fees might be an unavoidable cost of incentivizing professionals. I test this empirically. I study trustees, the most important professionals in chapter 7, who liquidate assets in exchange for legally mandated commissions. Exploiting kinks in the commission function, I estimate a structural model of moral hazard by trustees. I show that a policy change lowering trustee fees would harm trustee incentives, reducing liquidation values. Nonetheless, such a policy would dramatically improve creditor recovery, increasing small-business-lender recovery by 15.7%.