The governance of failure: An anatomy of corporate bankruptcy in Japan

Packer, Frank; Ryser, Marc

The broad trade-offs facing bankruptcy policy are, of course, not uniquely American. In this paper, we survey the Japanese corporate bankruptcy system, and present a comprehensive empirical analysis as to how it works in practice. Our framework for analysis is a variation on a theme of transaction cost economics: instruments of bankruptcy policy should effect a discriminating alignment between firms and the institutions governing failure, one which grants the services of legally centralized recontracting to those cases that warrant it, while maintaining incentive-intensity in private ordering for the others. (Williamson, 1985; 1989) This paper, through the examination of bankruptcy statistics, and the analysis of bankruptcy laws, courts and other institutions governing business failure in Japan, presents the Japanese system as a case study of corporate bankruptcy policy and institutional design.

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Academic Units
Center on Japanese Economy and Business
Center on Japanese Economy and Business, Graduate School of Business, Columbia University
Center on Japanese Economy and Business Working Papers, 62
Published Here
February 8, 2011