This paper explores the various governance models for financially distressed firms. We offer a new typology of major bankruptcy models and provide a connection between this bankruptcy law puzzle and the variables depicting the governance of healthy firms in order to shed light on two topics: (1) the factors that the lawyer should consider before changing its national bankruptcy law, and (2) the risks associated with each bankruptcy model according to the economic literature on bankruptcy law. Our final aim is to test whether the various bankruptcy models detailed in the paper perform in separate economic and legal environments. © 2008 Springer Science+Business Media, LLC.
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