Examining Corporate Insolvency from Efficiency and Welfare Perspectives: An Economic Analysis of the CIRP Mechanism

Abstract

It has been seven years since the Corporate Insolvency Resolution Process (CIRP) was introduced in the legislative setup of India which was then taking steps towards creating an innovative legislative regime to deal with corporate insolvency. However, there is still a dearth of studies analysing the efficacy of the mechanism with respect to the practical implementation on ground level. Through this study, the author aims at developing a comprehensive economic model to analyse the efficiency of the process. The model will be utilising simple economic theories and tools to explain the efficiency of the CIRP both from a production perspective and a welfare perspective. Moreover, the suggestions given in the article can help mitigate the inefficient outcomes due to the existing laws and behaviour of creditors.