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- Title
Financial Costs of Judicial Inexperience: Evidence From Corporate Bankruptcies.
- Authors
Iverson, Benjamin; Madsen, Joshua; Wang, Wei; Xu, Qiping
- Abstract
Exploiting the random assignment of judges to corporate bankruptcy filings, we estimate financial costs of judicial inexperience. Despite new judges' prior legal experience, formal education, and rigorous hiring process, their public Chapter 11 cases spend 19% more time in bankruptcy, realize 31% higher legal and professional fees, and 21% lower creditor recovery rates. Examining possible mechanisms, we find that new judges take longer to rule on motions and cases assigned to these judges file more plans of reorganization. Conservative estimates suggest that minor policy adjustments could increase creditor recoveries by approximately $16.8 billion for the public firms in our sample.
- Subjects
JUDICIAL selection &; appointment; CORPORATE bankruptcy; BANKRUPTCY courts; JUDGES; EXPERIENCE; UNITED States. Bankruptcy. Chapter 11, Reorganization; EXPERTISE
- Publication
Journal of Financial & Quantitative Analysis, 2023, Vol 58, Issue 3, p1111
- ISSN
0022-1090
- Publication type
Article
- DOI
10.1017/S002210902200062X