Norms In Private Insolvency Procedures: The 'London Approach' To The Resolution Of Financial Distress

Abstract

Law and economics scholarship has recently begun to investigate the role of social norms in shaping actors' incentives. This paper presents empirical findings on the way in which a group of such norms, known collectively as the 'London Approach', guide the resolution of financial distress by creditors of large UK firms and act as a substitute for legal insolvency proceedings. It appears that regulatory pressure applied by the Bank of England may have been critical in 'seeding' these norms. The paper also examines the prospects for the London Approach's future in light of changes in the financial environment brought about by globalisation.

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