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Bankruptcy and the Resolution of Financial Distress

Edith S. Hotchkiss
Boston College - Wallace E. Carroll School of Management

Kose John
New York University - Department of Finance

Karin S. Thorburn
Norwegian School of Economics and Business Administration; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)

Robert M. Mooradian
Northeastern University - College of Business Administration

January 2008

Abstract:
This paper reviews empirical research on the use of private and court-supervised mechanisms for resolving default and reorganizing companies in financial distress. Starting with a simple framework for financial distress and a quick overview of the theoretical research in this area, we proceed to summarize and synthesize the empirical research in the areas of financial distress, asset and debt restructuring, and features of the formal bankruptcy procedures in the US and around the world. Studies of out-of-court restructurings (workouts and exchange offers), corporate governance issues relating to distressed restructurings, and the magnitude of the costs and the efficiency of bankruptcy reorganizations are among the topics covered.

Keywords: Bankruptcy, financial distress, bankruptcy costs, fire-sales, bankruptcy auctions, reorganizations, Chapter 11

JEL Classifications: G33

Working Paper Series

Date posted: January 24, 2008 ; Last revised: July 13, 2008

Suggested Citation

Hotchkiss, Edith S., John, Kose , Thorburn, Karin S. and Mooradian, Robert M., Bankruptcy and the Resolution of Financial Distress (January 2008). Available at SSRN: http://ssrn.com/abstract=1086942

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Contact Information

Karin S. Thorburn (Contact Author) Norwegian School of Economics and Business Administration ( email ) Helleveien 30 Bergen 5045 Norway HOME PAGE: http://mba.tuck.dartmouth.edu/thorburn
Centre for Economic Policy Research (CEPR) 90-98 Goswell Road London EC1V 7RR United Kingdom
European Corporate Governance Institute (ECGI) c/o ECARES ULB CP 114 B-1050 Brussels Belgium HOME PAGE: http://www.ecgi.org
Edith S. Hotchkiss Boston College - Wallace E. Carroll School of Management ( email ) 140 Commonwealth Avenue Department of Finance Fulton Hall, Room 330 Chestnut Hill, MA 02467 United States 617-552-3240 (Phone) 617-552-0431 (Fax)
Kose John New York University - Department of Finance ( email ) Stern School of Business 44 West 4th Street New York, NY 10012-1126 United States 212-998-0337 (Phone) 212-995-4233 (Fax)
Robert M. Mooradian Northeastern University - College of Business Administration ( email ) 413 Hayden Hall Boston, MA 02115 617-373-5955 (Phone) 617-373-8798 (Fax)