This paper suggests a framework to analyze the efficiency properties of bankruptcy procedures, distinguishing between ex-ante and ex-post efficiency. Ex-post efficiency is mainly seen as allocative efficiency, which consists in maximizing the ex-post value of the reorganized firm, while we focus on two aspects of ex-ante efficiency: revenue efficiency, which consists in maximizing the proceeds to creditors from the reorganization of the firm and the compliance with absolute priority rule. We then use the framework described to analyze the efficiency properties of few bankruptcy procedures. We show, for example, that cash auctions although allocation-efficient may not be revenue-efficient.
This paper was presented at the conference held in Rome on 24-25 March 1994 to examine the results of the Bank of Italy's research project on the market for corporate control. The final reports discussed on that occasion have been published by II Mulino, Bologna
