Bankruptcy and the Resolution of Financial Distress
Edith S. Hotchkiss
Boston College - Carroll School of Management
New York University (NYU) - Department of Finance
Karin S. Thorburn
Norwegian School of Economics; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI)
Robert M. Mooradian
Northeastern University, D’Amore-McKim School of Business, Finance Area
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.
Number of Pages in PDF File: 89
Keywords: Bankruptcy, financial distress, bankruptcy costs, fire-sales, bankruptcy auctions, reorganizations, Chapter 11
JEL Classification: G33
Date posted: January 24, 2008
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