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Out-of-Court Restructuring versus Formal Bankruptcy in a Non-Interventionist Bankruptcy Setting


Philipp Jostarndt


Ludwig-Maximilians-Universität München - Faculty of Business Administration (Munich School of Management)

Zacharias Sautner


Frankfurt School of Finance & Management gemeinnützige GmbH

August 27, 2009

Review of Finance 14, 2010, 623-668

Abstract:     
We investigate debt restructurings in Germany for a sample of 116 financially distressed companies. About half of the firms succeed in restructuring their debt in a workout while the others file for bankruptcy. Our evidence suggests that firms which have higher leverage, owe more debt to banks, and exhibit higher going concern values are more likely to conduct a workout. Bankruptcy is more likely for firms with deficient lender coordination and a high fraction of collateralized debt.

An analysis of stock returns suggests that the market uses similar information to predict workouts. 84% of the bankrupt firms were ultimately liquidated.

Number of Pages in PDF File: 58

Keywords: Bankruptcy, debt restructuring, capital structure

JEL Classification: G32, G33

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Date posted: March 25, 2008 ; Last revised: August 3, 2012

Suggested Citation

Jostarndt, Philipp and Sautner, Zacharias, Out-of-Court Restructuring versus Formal Bankruptcy in a Non-Interventionist Bankruptcy Setting (August 27, 2009). Review of Finance 14, 2010, 623-668 . Available at SSRN: http://ssrn.com/abstract=1107115 or http://dx.doi.org/10.2139/ssrn.1107115

Contact Information

Philipp Jostarndt
Ludwig-Maximilians-Universität München - Faculty of Business Administration (Munich School of Management) ( email )
Kaulbachstr. 45
Munich, 80539
Germany
Zacharias Sautner (Contact Author)
Frankfurt School of Finance & Management gemeinnützige GmbH ( email )
Sonnemannstraße 9-11
Frankfurt am Main, 60314
Germany
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