Abstract
AbstractThis study investigates the main legal determinants of corporate reorganization use. Three legal aspects of bankruptcy voting process were examined, such as the voting right of secured creditors (1), bankruptcy voting rule (2), and court's legal right to overrule creditors’ decision (3). Using a sample of 20 countries, our estimations confirm that granting a voting right to secured lenders tends to be associated with more corporate reorganizations. Secured creditors’ voting right may send a signal about firm's capacity to recover from financial distress. Such signal can encourage unsecured creditors to support the reorganization plan.
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