Asset Allocation in Bankruptcy

Shai Bernstein, Emanuele Colonnelli and Benjamin Iverson

Working Papers from U.S. Census Bureau, Center for Economic Studies

Abstract: This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy, employment and wages paid at real estate assets over time. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that even after accounting for reallocation, the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users, in areas with low access to finance, and in areas with low economic growth. The results highlight that different bankruptcy approaches affect asset allocation and utilization particularly when search frictions and financial frictions are present.

Pages: 71 pages
Date: 2016-02
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Citations: View citations in EconPapers (4)

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https://www2.census.gov/ces/wp/2016/CES-WP-16-13.pdf First version, 2016 (application/pdf)

Related works:
Journal Article: Asset Allocation in Bankruptcy (2019)
Working Paper: Asset Allocation in Bankruptcy (2017)
Working Paper: Asset Allocation in Bankruptcy (2016)
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Persistent link: https://EconPapers.repec.org/RePEc:cen:wpaper:16-13

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