Value Destruction in the New Era of Chapter 11

Vedran Capkun (), Barry E. Adler and Lawrence A. Weiss
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Vedran Capkun: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: Over the past two decades, control over the US bankruptcy reorganization process has shifted from a debtor's pre-bankruptcy managers to holders of secured claims. The result has been increased adherence to absolute priority and a harder landing for the debtor's managers and shareholders. Because managers still make or can influence the decision whether or when to file a bankruptcy petition, we hypothesize that anticipation of bankruptcy under these new conditions will result in a delay in filing, increased leverage, increased secured debt, and a reduction of asset value for firms at the time they file. We present empirical evidence consistent with our hypotheses.

Keywords: Value Destruction; New Era; Chapter 11 (search for similar items in EconPapers)
Date: 2013-04
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Citations: View citations in EconPapers (11)

Published in Journal of Law, Economics, and Organization, 2013, 29 (2), pp.461-483. ⟨10.1093/jleo/ewr004⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00674234

DOI: 10.1093/jleo/ewr004

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