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A ground-based ultra-wideband radiometer operating at 540, 900, 1380, and 1740 MHz was used to measure microwave thermal emissions from an Arctic sea ice floe as part of the Multidisciplinary drifting Observatory for the Study of Arctic Climate (MOSAiC) Expedition. The instrument was deployed on a drifting ice floe near 86°N, 120°E in leg 1 of the expedition (December 2019) and observed second-year ice (potentially with refrozen melt ponds) that experienced new ice growth at its base over a ten-day period. Measured circularly polarized brightness temperatures were compared with the predictions of a radiative transfer (RT) model for a layered medium consisting of ocean, growing new ice, desalinated remnant second-year ice/refrozen melt pond, and snow layers. Characteristics of the sea ice composition used in the model were determined from in-situ measurements. Comparisons of the measured and modeled wideband brightness temperatures showed good agreement consistently over the observation period and for various off-nadir observation angles. The results demonstrate the capabilities of 0.5-2 GHz microwave radiometry for observing sea ice properties and also show the impact of a saline ice layer at the ice bottom on the measured brightness temperature.

In this paper we propose a theory of optimal property rights in a financial contracting setting. Following recent contributions in the property law literature, we emphasize the distinction between contractual rights, that are only enforceable against the parties themselves, and property rights, that are also enforeceable against third parties outside the contract. Our analysis starts with the following question: which contractual agreements should the law allow parties to enforce as property rights? Our proposed answer to this question is shaped by the overall objective of minimizing due diligence (reading) costs and investment distortions that follow from the inability of third-party lenders to costlessly observe pre-existing rights in a borrower's property. Borrowers cannot reduce these costs without the law's help, due to an inability to commit to protecting third-parties from redistribution. We find that the law should take a more restrictive approach to enforcing rights against third-parties when these rights are i) more costly for third-parties to discover, ii) more likely to redistribute value from third-parties, and iii) less likely to increase efficiency. We find that these qualitative principles are often reflected in observed legal rules, including the enforceability of negative covenants; fraudulent conveyance; corporate veil-piercing; and limits on assignability.

This paper focuses on a key property of asset-backed securities (ABS); namely, that ABS are designed to achieve "bankruptcy remoteness"of the securitized assets from the borrowing …rm. This provides lenders with maximal protection from dilution that is not available with other contracts, such as secured debt. ABS can have real eects in allowing …rms to commit to more e¢ cient investment decisions in bankruptcy. We show that securitization of replaceable assets (such as receivables) prevents ine¢ cient continuation in bankruptcy, but securitization of necessary assets can lead to ine¢ cient liquidations. In these circumstances, secured debt and/or leases can be preferred. Our model also predicts that greater legal risk of "bankruptcy remoteness"being undermined by courts leads to lower overall e¢ ciency and higher interest rates for ABS investors. We test this second prediction using a controversial decision in the Chap- ter 11 bankruptcy of LTV Steel, in which a securitization contract was unexpectedly treated as a secured loan. Using a dierence-in-dierences approach, we …nd that ABS spreads for securitizers eligible for Chapter 11 increased signi…cantly more than spreads for insured bank securitizers, who are not Chapter 11-eligible, in the period fol- lowing the LTV …ling. The results demonstrate that the creditor protection provided by "bankruptcy remoteness"is indeed valuable and priced in …nancial markets.

Many firms have filed for bankruptcy to manage mass tort liabilities, most notably asbestos producers. We model a bankruptcy procedure that optimally balances the liquidity needs of present claimants and an uncertain number of future claimants. We find that future claimants should receive greater awards in expectation than present claimants as compensation for bearing greater future claims risk. We also find that allocating more value to contractual creditors in bankruptcy makes an earlier filing more likely, which may increase overall welfare. Optimal risk-sharing implies that creditors should receive equity in a trust fund, with tort claimants receiving senior debtlike securities.

This chapter, for the Oxford Handbook of Corporate Governance, provides a survey of law, economics, and finance scholarship at the intersection of corporate governance and financial distress. In financial distress, both inside and outside of bankruptcy court, formal and informal control rights are paramount. Thus, we organize our review around the major constituencies that exercise control rights in distressed firms: shareholders, managers and boards; senior and junior creditors; and the law, courts and judges. Broadly, our review suggests that an understanding of the incentives of these constituencies is crucial to explaining outcomes. Our review also documents the paradigm shift in the bankruptcy literature, away from the “safe haven” view of Chapter 11 as a slow, manager and shareholder-controlled reorganization process. Chapter 11 case outcomes are increasingly steered by sophisticated activist investors, generating faster resolutions that are more creditor-controlled. We suggest some directions for future research in light of these developments.

An influential theory in the management literature (Christensen, 1997) argues that incumbent firms have difficulty commercializing innovations that are not initially useful to its existing customers, and recommends creating separate, autonomous units for the innovation. This paper explains why subsidiary entities, even when wholly-owned and formally controlled by their corporate parent, can assist in this process. I show that placing the innovation in a subsidiary creates more autonomy for the unit manager of the innovation than if the same project were held as a division inside the parent entity. The key difference between subsidiaries and divisions in my model is limited liability: unlike a division, the parent has the option to walk away from the subsidiary's obligations. Because of this implicit "put option", the parent invests less in developing internal uses for the innovation. This causes the unit manager to invest more in developing independent uses for the innovation, for two reasons. First, less investment by the parent means the unit manager must "sink or swim" on the product of his own effort. Second, less parent involvement means that the unit manager's desired actions are less subject to overrule. This increases the unit manager's initiative, as in Aghion and Tirole (1987).

We analyze a sample of large privately and publicly held businesses that filed Chapter 11 bankruptcy petitions during 2001. We find pervasive creditor control. In contrast to traditional views of Chapter 11, equity holders and managers exercise little or no leverage during the reorganization process. 70 percent of CEOs are replaced in the two years before a bankruptcy filing, and few reorganization plans (at most 12 percent) deviate from the absolute priority rule to distribute value to equity holders. Senior lenders exercise significant control through stringent covenants, such as line-item budgets, in loans extended to firms in bankruptcy. Unsecured creditors gain leverage through objections and other court motions. We also find that bargaining between secured and unsecured creditors can distort the reorganization process. A Chapter 11 case is significantly more likely to result in a sale if secured lenders are oversecured, consistent with a secured creditor-driven fire-sale bias. A sale is much less likely when these lenders are undersecured or when the firm has no secured debt at all. Our results suggest that the advent of creditor control has not eliminated the fundamental inefficiency of the bankruptcy process: resource allocation questions (whether to sell or reorganize a firm) are ultimately confounded with distributional questions (how much each creditor will receive) due to conflict among creditor classes.

We analyze a sample of large Chapter 11 cases to determine which factors motivate the choice of filing in one court over another when a choice is available. We focus in particular on the Delaware court, which became the most popular venue for large corporations in the 1990s. We find no evidence to suggest that Delaware's popularity was driven by managers or equity holders seeking a procedure friendly to their interests. Instead, debt structure differences, specifically, the fraction of assets financed with secured debt, and court characteristics, particularly a court's level of experience, are the most important factors driving the choice of venue. While Delaware does not appear significantly different with respect to deviations from absolute priority in favor of equity or likelihood of producing reorganizations, it does differ along the dimension of speed. Controlling for other factors, we find that a Delaware reorganization is between 140 and 190 days faster than an equivalent case in another court. Given that speed benefits secured creditors most, we conclude that Delaware's popularity in the 1990s was unlikely to have resulted from a pro-debtor bias combined with a manager or equity holder preference for Delaware.

We study a model of optimal bankruptcy law in an environment where legal quality can vary along two dimensions: the ability of judges, and the quality of contract enforcement. We analyze a model in which a judicially-influenced bankruptcy process can enhance the efficiency of incomplete contracts by conditioning the allocation of control rights in bankruptcy on firm quality. We consider the optimal balance of debtor and creditor interests as a function of the legal environment, and show that the optimal degree of "creditor-friendliness" in the bankruptcy code increases as judicial ability to recognize firm quality falls and as the quality of contract enforcement deteriorates. Our model contributes to the existing bankruptcy law design literature in demonstrating that a "debtor-friendly" law that focuses on preserving going-concern value, such as U.S. Chapter 11, requires judicial expertise to be effective. Where such expertise is unavailable, a law that focuses more on creditor recovery is preferred. Our model is also able to explain cross-country patterns in the content and usage of bankruptcy laws around the world as reported in existing empirical research.

Leading scholars in the field of law and economics contribute their original theoretical and empirical research to this major Handbook. Each chapter analyzes the basic architecture and important features of the institutions of property law from an economic point of view, while also providing an introduction to the issues and literature.

We analyze a sample of large Chapter 11 cases to determine which factors motivate the choice of filing in one court over another when a choice is available. We focus in particular on the Delaware court, which became the most popular venue for large corporations in the 1990s. We find no evidence of agency problems governing the venue choice or affecting the outcome of the bankruptcy process. Instead, firm characteristics and court characteristics, particularly a court's level of experience, are the most important factors. We find that court experience manifests itself in both a greater ability to reorganize marginal firms and in reorganizing such firms faster. Delaware is similar to other high-experience courts in terms of the likelihood of reorganization controlling for firm characteristics, but is a standout in terms of speed. We estimate that a Delaware bankruptcy requires approximately 40% less time to complete than an equivalent case in another court.