The Adaptive Capacity of Markets and Convergence in Law: UK High Yield Issuers, US Investors and Insolvency Law

This article examines something of a puzzle: increasing access by UK issuers of high yield bonds to US investors notwithstanding substantive differences in the approach to valuation of the issuer in financial distress in US and UK restructuring law and, therefore, in anticipated return on default. It examines the development of the market in the context of existing theories on the relationship between law and finance and suggests that previous accounts have overlooked the adaptive capacity of the finance market to legal environment and the implications of such structural adaptation for the prospects of convergence in law. Three states are identified: a state in which the market is poorly adapted to the legal environment and reinforces other pressure for change, a state in which the market is adapted to the legal environment and is a neutral influence on, or even dampens, other pressure for change and a state in which both legacy and adapted structures exist, potentially pulling in different directions at the same time.