Chapter 11 bankruptcy outcomes and gubernatorial election cycles

Wolfgang Breuer, Simon Haas and Andreas Knetsch

Finance Research Letters, 2025, vol. 82, issue C

Abstract: We find that Chapter 11 bankruptcy cases are more likely to result in emergence if decided shortly before a gubernatorial election, where the incumbent seeks re-election. However, firms emerging from bankruptcy during this period have a lower chance of long-term survival. This suggests that governors promote the survival of bankrupt firms, even those without a sustainable business model, to enhance their re-election prospects. Governors support bankrupt firms by influencing court decision-makers – particularly judges. A key motive for such gubernatorial intervention is to secure the votes of employees affected by bankruptcy.

Keywords: Chapter 11 bankruptcy; Gubernatorial influence; Election cycle (search for similar items in EconPapers)
JEL-codes: D72 G33 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325007822

DOI: 10.1016/j.frl.2025.107523

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