The following six bankruptcy-related working papers can be downloaded from the Social Science Research Network:
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University of Texas Law School’s A. Mechele Dickerson: “Words that Wound: Defining, Discussing, and Defeating Bankruptcy ‘Corruption’.”
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Harvard Law School’s Ethan Bernstein: “All’s Fair in Love, War & Bankruptcy?: Corporate Governance Implications of CEO Turnover in Financial Distress.”
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Boston College Law School’s Catharine P. Wells: “Who Owns the Local Church? A Pressing Issue for Dioceses in Bankruptcy.”
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Syracuse University Law School’s Gregory L. Germain: “Income Tax Claims in the Year of Bankruptcy: A Congressionally Created Quagmire.”
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University of Reading’s Charles Grant and Institute for the Study of Labor’s Winifried Koeniger: “Redistributive Taxation and Personal Bankruptcy in US States.”
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Texas A&M’s Li Gan and Washington University’s Tarun Sabarwal: “A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy.”
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Abstracts for each of these working papers follow:

A. Mechele Dickerson – “Words that Wound: Defining, Discussing, and Defeating Bankruptcy ‘Corruption’“:

In Courting Failures How Competition for Big Cases Is Corruption the Bankruptcy Courts, Professor Lynn M. LoPucki argues that certain bankruptcy courts, most notably those in New York, Chicago, and Delaware, are competing for large Chapter 11 cases and that this competition has corrupted the bankruptcy system. Not surprisingly, these provocative arguments concerning venue choices for large firms has caused an uproar in the bankruptcy community. Indeed, because many of the lawyers and judges who have read the book perceive that it unfairly attacks the integrity of the bankruptcy bench, the discourse over problems associated with the current bankruptcy venue choices available for large corporations has been overshadowed by the politically loaded term ‘corruption’.
This review essay attempts to re-characterize the notion of corruption and suggests that reasonable minds rationally could conclude that at least some of the court practices that Courting Failures suggests are corrupt can be explained by reasons having nothing with a court’s desire to compete for big bankruptcy cases. The essay concludes by agreeing with the book’s findings concerning some of the corrupt management practices that caused the downfall of Enron, WorldCom, and other large firms and proposes that corporate boards should face the risk of a shaming sanction (i.e., being labeled unfit to serve on corporate boards) to give them a greater incentive to monitor those corrupt practices.

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Ethan Bernstein – “All’s Fair in Love, War & Bankruptcy?: Corporate Governance Implications of CEO Turnover in Financial Distress“:

Prior discussions of management turnover during financial distress have examined bankrupt and non-bankrupt firms as distinct groupings with little overlap. Separately investigating rates of turnover in-bankruptcy and out-of-bankruptcy, without a direct comparison between the two, has resulted in a narrowing of the accepted influence of bankruptcy law to post-petition, in-court decisions. Based on new evidence of CEO turnover in 2001, I argue empirically that this distinction between in-court and out-of-court restructuring has become meaningless from a governance perspective. In 2001, filing for bankruptcy did not change the rate of CEO turnover when one controls for financial condition. This statistically significant finding indicates that the “shadow of bankruptcy” has lengthened, making bankruptcy law a central tenet of governance policy regardless of whether a Chapter 11 petition is ever filed. After presenting these results, this article considers the implications of these results on the changing perceptions of the role of CEOs and the evolution of the multi-pronged U.S. corporate governance system.

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Catharine P. Wells – “Who Owns the Local Church? A Pressing Issue for Dioceses in Bankruptcy“:

The recent bankruptcies of Catholic Dioceses are unprecedented. For the first time, Bankruptcy Courts must deal with the difficult question of who owns the parish church. In this paper, I will explore two possible sources of confusion about this question. The first is the non- commercial, charitable nature of the Church. The second is its organizational complexity. Resolving the confusion requires a familiarity with various different sources of law including charities law, bankruptcy law, trust law, and Canon Law. In this paper I address this issue by: 1. discussing why the equities and policies that govern charitable bankruptcies are different from those that govern commercial bankruptcies; 2. laying out a road map for determining ownership issues that indicates what sub-questions must be answered and in what order; and 3. discussing the role that each of the different sources of law plays in answering these questions. My conclusion is that, in most circumstances, individual parishes do have a significant ownership stake in assets that are given or dedicated for their use.

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Gregory L. Germain – “Income Tax Claims in the Year of Bankruptcy: A Congressionally Created Quagmire“:

The article considers the proper treatment of the government’s claim for income taxes incurred in the year of bankruptcy, both before and after the 2005 bankruptcy amendments go into effect on October 17, 2005. The article examines the inconsistent theories adopted by the courts in dealing with year-of-bankruptcy tax claims, and considers how those theories will work after the 2005 BAPCPA amendments go into effect. The author concludes that the pre-petition portion of year-of-bankruptcy tax claims should be treated as a dischargeable general unsecured claim – a result that Congress likely did not intend when amending the statute.

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Charles Grant and Winifried Koeniger – “Redistributive Taxation and Personal Bankruptcy in US States“:

Both personal bankruptcy and redistributive taxes can insure households’ consumption risk and both vary considerably across US states. We derive sufficient conditions under which more redistributive taxation makes bankruptcy exemptions less attractive both for the intratemporal insurance and for inter-temporal consumption smoothing. Exploiting data variation over time for 18 US states 1980-2003, we find considerable support for our model’s predictions: (i) redistributive taxation and bankruptcy exemptions are negatively correlated; (ii) both policies are associated with more equal consumption growth whereas the effect on unsecured household debt is less clear-cut.

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Li Gan and Tarun Sabarwal – “A Simple Test of Adverse Events and Strategic Timing Theories of Consumer Bankruptcy“:

A test of adverse events and strategic timing theories can be conducted by determining whether some relevant financial decision variables, such as financial benefit from filing for bankruptcy, or debt discharged in bankruptcy are endogenous with the bankruptcy decision or not. For the strategic timing theory such decisions are endogenous, while for the adverse events theory they are not. Hausman tests for endogeneity show that financial benefit, unsecured debt, and non-exempt assets are exogenous with the bankruptcy decision, consistent with the adverse events theory.

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Special thanks to the folks at ssrn.com, who suggested we let people know of the following policies and procedures in respect of downloading papers from SSRN:

Anyone new to our system who clicks on the link to purchase the paper will be first asked to register their e-mail address on our system. This is something that is required before one can download. The registration is just a security feature and doesn’t cost anything, nor will the e-mail address be used for any other purpose but for our system to be able to recognize the user in his use of our services.

© Steve Jakubowski 2005