EX-ANTE EFFICIENCY OF BANKRUPTCY PROCEDURES

This paper suggests a framework to analyze the efficiency properties o f bankruptcy procedures, distinguishing between ex-ante and ex-post ef ficiency. Ex-post efficiency consists in maximizing the ex-post value of the insolvent firm, whereas ex-ante efficiency consists in maximizi ng the proceeds to creditors from the reorganization of the firm and p roviding incentives for the creditors to monitor the firm, We show tha t the definition of creditors' ownership rights over the company and t he protection of the creditors' seniority, are crucial to asses the ex -ante efficiency of a bankruptcy procedure. (C) 1997 Elsevier Science B.V.