A Game Theoretic Analysis of the Relative Payouts to Operational Creditors and Financial Creditors from Bankruptcy Resolution in India
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Rohit Prasad
,
Gaurav Gupta
Abstract
This paper analyses the outcomes of the cases resolved under Insolvency and Bankruptcy Code of India to examine the treatment of admitted claims for the two main classes of creditors i.e. operational and financial creditors. It shows that, at an aggregate level, operational creditors and financial creditors realize an equal percentage of their claims. However, at an individual level, there is wide heterogeneity in the treatment of the two classes of creditors. Three benchmark division rules – Proportional division, Constrained Equal Losses and Constrained Equal Awards, are used to characterize the actual divisions in each case. This analysis allows us to hypothesize that when aggregate claims of operational creditors are tiny, the Constrained Equal Awards (that is extremely generous to small creditors), does well. When aggregate claims of operational creditors are large, the Proportional rule does well. But when the claims of operational creditors fall in an intermediate range, the Constrained Equal Losses rule which is most unfavourable to the operational creditor comes to the fore. Hence, some broad guidelines that can be applied on a case by case basis appear to be desirable.
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Articles in the same Issue
- Research Articles (Special Issue)
- Machine Learning and Law and Economics: A Preliminary Overview
- The Impact of Artificial Intelligence on the Right to a Fair Trial: Towards a Robot Judge?
- Research Articles (Regular Issue)
- A Game Theoretic Analysis of the Relative Payouts to Operational Creditors and Financial Creditors from Bankruptcy Resolution in India
- Financial Sector Reforms and its Impact on Economy of Pakistan
Articles in the same Issue
- Research Articles (Special Issue)
- Machine Learning and Law and Economics: A Preliminary Overview
- The Impact of Artificial Intelligence on the Right to a Fair Trial: Towards a Robot Judge?
- Research Articles (Regular Issue)
- A Game Theoretic Analysis of the Relative Payouts to Operational Creditors and Financial Creditors from Bankruptcy Resolution in India
- Financial Sector Reforms and its Impact on Economy of Pakistan
