Abstract

http://ssrn.com/abstract=1291620
 
 

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Destruction of Value in the New Era of Chapter 11


Barry E. Adler


New York University School of Law

Vedran Capkun


HEC Paris - Accounting and Management Control Department

Lawrence A. Weiss


Tufts University - The Fletcher School

October 2006

NYU Working Paper No. CLB-06-032

Abstract:     
The Bankruptcy Reform Act of 1978 placed corporate managers in control of corporate debtors in bankruptcy and of the bankruptcy process. Although the act remains law, between 2000 and 2001 it became common for creditors to control financially distressed firms and the bankruptcy process. This study tests whether the change from manager to creditor control created or exacerbated managerial incentive to delay filing for bankruptcy or gave secured creditors an opportunity to delay such filing. We observe a significant and prolonged deterioration in the financial condition of firms that filed for bankruptcy after 2001 as compared to firms that filed before 2000. We alsoobserve patterns of operating losses and liquidations that suggest adverse economic consequences from such delay.

Number of Pages in PDF File: 47

Keywords: Bankruptcy, Incentives, Bankruptcy Initiation, Economic distress, Financial distress

JEL Classification: D21, G33, K22

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Date posted: October 31, 2008  

Suggested Citation

Adler, Barry E. and Capkun , Vedran and Weiss, Lawrence A., Destruction of Value in the New Era of Chapter 11 (October 2006). NYU Working Paper No. CLB-06-032. Available at SSRN: http://ssrn.com/abstract=1291620

Contact Information

Barry E. Adler
New York University School of Law ( email )
40 Washington Square South
New York, NY 10012-1099
United States
212-998-6660 (Phone)
212-995-4341 (Fax)
Vedran Capkun
HEC Paris (Groupe HEC) - Accounting and Management Control Department ( email )
Jouy-en-Josas Cedex
France

Lawrence A. Weiss
Tufts University - The Fletcher School ( email )
Medford, MA 02155
United States
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