Patterns in a Complex System: An Empirical Study of Valuation in Business Bankruptcy Cases


This Article applies complex systems research methods to explore the characteristics of the bankruptcy legal system, presenting the results of an empirical study of twenty years of bankruptcy court valuation doctrine in business cramdown cases. These data provide solid descriptions of how courts exercise their discretion in valuing firms and assets.

This Article accomplishes two objectives: First, using scientific methodology, this Article explains the content of bankruptcy valuation doctrine. Second, this Article uses doctrine as a variable to explore system dynamics that govern the processes of change over time.

Significant findings include (i) courts tend to “split the difference” in valuations much less frequently than expected; (ii) parties’ valuation standards tend to be close together; (iii) bankruptcy courts’ valuation approach is substantially influenced by whether the valuation includes a calculation for the time value of money; (iv) there seems to be some geographic distribution of courts’ acceptance of valuation models, with Southern states more likely to accept “soft” valuation models, and non-Southern states more likely to accept “hard” valuation models; and (v) the evidence offers preliminary support for the hypothesis that bankruptcy system content may self-organize according to some complex deterministic dynamics.


Bankruptcy Law | Business Organizations Law | Commercial Law | Economics | Jurisprudence | Law and Economics | Law and Society

Date of this Version

March 2005