Bankruptcy Judges and Creditor Rights

In this paper, we assess how bankruptcy judges' characteristics affect their decisions in bankruptcy cases. Exploiting judge assignments to different courts based on administrative rules, random case assignments, combined with micro-level data on judges' personal and professional characteristics and their decisions in bankruptcy cases, we find that female judges, judges with overseas education, and judges from politically more conservative regions make more creditor-friendly decisions. Differences in creditor-friendliness are driven by judges rejecting more cases and liquidating more firms during proceedings. In addition, judges who graduated from elite law schools and private high schools are more likely to actively intervene in cases, rejecting more restructuring plans and changes thereof. These findings suggest that the composition of judges significantly affects the creditor-friendliness of a bankruptcy system, which can drive a wedge between de jure and de facto creditor rights.