Integrity of financial information as a determinant of the outcome of a bankruptcy procedure

María-del-Mar Camacho-Miñano and Domenico Campa

International Review of Law and Economics, 2014, vol. 37, issue C, 76-85

Abstract: The outcome of a bankruptcy procedure – ‘liquidation’ or ‘reorganization’ – has many legal, economic and social consequences for stakeholders of financial distressed companies. The objective of this paper is to show whether financial information integrity is a determinant for a ‘liquidation’ or ‘reorganization’ decision. Two measures of earnings management as proxies for financial reporting integrity are used on a matched sample of 2064 Spanish bankrupt and healthy companies. The results indicate that only firms which receive a ‘liquidation’ decision manipulate earnings more than their pairs. This study helps to shed light on the consequences of earnings management during a bankruptcy procedure.

Keywords: Integrity; Bankruptcy procedure; Earnings management; Ex-post bankruptcy analysis; Liquidation; Reorganisation (search for similar items in EconPapers)
JEL-codes: G33 K22 M41 (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:eee:irlaec:v:37:y:2014:i:c:p:76-85

DOI: 10.1016/j.irle.2013.07.007

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