Economic Structure, Information Structure And Business Bankruptcy

An important proposition in economics is that competition can make the market run to long-term equilibrium. In this process, the inefficient firms are eliminated and the laws that regulate the exit of these firms are bankruptcy laws. Management failure is a common phenomenon in competitive markets, so effective bankruptcy law and creditors' protection systems are important to the continual development of economy. My thesis studies the interaction of judiciary discretion, information structure and bankruptcy law.My thesis is composed of eight chapters. The first chapter is an introduction. In the second chapter, I introduce briefly the historical evolution of bankruptcy and the main bankruptcy procedures in present. In the following chapter, I systematically hackle various literatures on corporate bankruptcy, including the summary on corporate bankruptcy under the market economy and the transition economy. In chapter four, I build a basic model under the condition of perfect market economy and analyze the design of first-best bankruptcy law. This is a benchmark for the following analyses. I firstly define the one-dimensional asymmetric information between the manager and the investors in chapter five. Then I study the optimal bankruptcy law under this asymmetric information and the effect of judiciary discretion on bankruptcy law and the economic efficiency. Based on the analyses in chapter five, I deepen the asymmetric information between managers and the investors and build a two-dimensional information structure in chapter six. According to this information structure, I divide the social economic system into three different types: developed market-oriented economic system, developed bank-oriented economic system and undeveloped transitional economic system. Then I study the optimal bankruptcy law under developed economic systems including the market-oriented and bank -oriented economic system. Considering the particularity of transitional economy, I investigate specially the optimal bankruptcy law in the undeveloped transitional economic systems in chapter seven. I also research the effect of certain unusual environment and factors on bankruptcy law andeconomic efficiency. After these theoretical analyses, I empirically test the bankruptcy course in China during the last twenty years in the next section. In the last chapter, I briefly summarize the main conclusions in my thesis and advance the direction for further research.