What is it about?
Bankruptcy is one of the outcomes of the market process in a free market. In the absence of the government’s apparatus, firms and creditors are free to continue their businesses or to reach an agreement to defer the timing of payment and conducting the insolvency to pay the debts. In spite of this, governments whose political benefits lead them to use interventionist methods such as securing jobs and subsidizing local businesses, enact modern bankruptcy law to protect the insolvent firms, and give them the opportunity of reconstruction.
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Why is it important?
This article discusses that bankruptcy is part of the normal process of the free market, and rule of law ought to guarantee freedom of parties to negotiate and compensation of the creditors in conclusion. A case study is offered to enlighten that the implementation of modern bankruptcy law would not solve the problems because the main problem is the lack of strengthened property rights.
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This page is a summary of: Enforcing Property Rights Through the Elements of Freed Market; a Case for Iran’s Bankruptcy Law, SSRN Electronic Journal, January 2020, Elsevier,
DOI: 10.2139/ssrn.3630849.
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