Cross-border insolvency: A case for a transaction cost economics analysis

This paper examines cross-border insolvencies through the lens of Williamson’s Transaction Cost Economics (TCE). It makes three arguments: firstly, it identifies some tendencies in current cross-border insolvency practices that align with the TCE methodology. Secondly, based on a normative argument using TCE, it recommends some policy arguments to increase transaction cost efficiency of cross-border insolvency processes. Thirdly, it proposes a predictive tool that might be used to pre-empt the decision about how to govern particular cross-border insolvencies based on their transaction profile. Using TCE to analyse cross-border insolvencies as proposed in this paper is novel. While various scholars have studied the relative efficiency of universalism and territoriality and others have concentrated on efficiency in insolvency law generally, none has studied the governance of cross-border insolvencies in a comparative way to predict the most transaction cost efficient governance mode for different cross-border insolvency transaction types.