| Popis: |
The U.S. Chapter 7 bankruptcy system relies on private trustees to administer liquidations. By law, creditors pay trustees a substantial commission on asset sales. I exploit kinks in the commission function to estimate a structural model of moral hazard by trustees. While reducing commissions would harm trustee incentives, lowering sale values, I nonetheless find that lower commissions would significantly benefit creditors. My estimates imply that corporate Chapter 7 creditors pay excessive commissions that subsidize individual debtors, who pay trustees a small fee and rarely surrender assets. Small-business lenders disproportionately bear the costs of this subsidy. |
