Duration analysis of corporate bankruptcy in the presence of competing risks

Sehoon Kwon and Sang Buhm Hahn

Applied Economics Letters, 2010, vol. 17, issue 15, 1513-1516

Abstract: The bankruptcy duration of reorganized firms should be different from that of failed firms. Adopting a competing risk model and using the Korean corporate bankruptcy data, we confirm the differences in reorganized and failed cases. We find that the failure decision of bigger firms seems delayed (the too-big-to-fail-too-early hypothesis). In systemic bankruptcy, the bankruptcy period is shortened and the reorganization bias is increased (Super Chapter 11 principle). Also, if bankruptcy is filed in a poor business environment, reorganization may occur faster and failure slower for that company (handicapped signal theory).

Date: 2010
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DOI: 10.1080/13504850903035840

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