While the corporate bankruptcy regime of the United States provides for a so-called debtor-oriented regime, many European corporate bankruptcy regimes could hitherto be labelled as creditor-oriented. Yet bankruptcy reform in Europe generally emphasizes the need for introducing schemes that facilitate business rescue, which has already led several European countries to add reorganization mechanisms to their bankruptcy laws. Surprisingly, on both sides of the Atlantic, policy makers pay little attention to corporate bankruptcy as a corporate governance mechanism. This paper argues that the comparative efficiency of corporate bankruptcy regimes cannot be considered separately from the governance structures of firms that make use of the bankruptcy laws. To evidence this, the paper analyzes two types of governance structure, namely that of the small and medium-sized firm with a concentrated secured bank lender and that of the publicly held firm with a dispersed ownership structure. This account gives rise to a reformulation of the trade-offs made by debtor- and creditor-oriented regimes and suggests that different optimal regimes may exist for different types of firms.

This article provides a critical overview of the latest spate of European Commission proposals on the reform of corporate governance in the EU. The authors suggest that most of the proposed measures are simply reactions to recent corporate governance fallouts and new legislation in the US. This article supplies evidence that the EC's measures are in fundamental disequilibrium with the core and supporting institutions of corporate governance in the EU. The authors conclude that the EU should, rather than embark on a complex exercise in harmonisation, build on the strength of its diversity and imitate the US where it is warranted.