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Erasmus Law Review

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Issue 1, 2024 Expand all abstracts
Article

Access_open Are Insolvency Practitioners Human? On the Role of Similarity, Outcome and Gender Bias in Insolvency Situations

Keywords similarity bias, outcome bias, gender bias, legal psychology, business valuation
Authors Marc Broekema, Niek Strohmaier, Jan Adriaanse e.a.
AbstractAuthor's information

    This article adopts a psychological lens to investigate whether cognitive biases might obscure insolvency practitioners’ perceptions. Through an experimental study among members of INSOL International (N = 272), we find that insolvency practitioners’ judgments of business valuations and business valuators in an insolvency situation are affected by (1) the degree of perceived similarity with the valuator (i.e. similarity bias) and (2) the outcome of a bankruptcy deal in which a valuation is used (i.e. outcome bias), such that their judgments are more favourable in case of higher perceived similarity and in case of a positive outcome. Furthermore, we find that male insolvency practitioners have more trust in male valuators than in female valuators, suggesting that (3) gender biases play a role as well. These findings shine a light on decision-making in business rescue and bankruptcy cases and the insolvency industry in general. The findings call for further research on cognitive biases in insolvency-related matters including possible implications for policymakers.


Marc Broekema
Marc Broekema is Assistant Professor at the Leiden Law School, Department of Business Studies, University of Leiden, the Netherlands, managing director at financial advisory firm Kroll, and lay judge at the Enterprise Chamber of the Amsterdam Court of Appeal.

Niek Strohmaier
Niek Strohmaier is Assistant Professor at the Leiden Law School, University of Leiden, the Netherlands, and is affiliated with law firm RESOR.

Jan Adriaanse
Jan Adriaanse is Professor at the Leiden Law School, University of Leiden, the Netherlands, and director at financial advisory firm Kroll.

Jean-Pierre van der Rest
Jean-Pierre van der Rest is Professor at the Leiden Law School, University of Leiden, the Netherlands. The article is based on the doctoral research project of Marc Broekema, who successfully defended his dissertation ‘Cognitive Bias in the Judgment of Business Valuations and Valuators’ in April 2020 at Leiden University.

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