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http://ssrn.com/abstract=1291620
 
 

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Value Destruction 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

February 6, 2012

Journal of Law, Economics, & Organization (2013) 29 (2): 461-483

Abstract:     
Over the past two decades, control over the US bankruptcy reorganization process has shifted from a debtor's pre-bankruptcy managers to holders of secured claims. The result has been increased adherence to absolute priority and a harder landing for the debtor’s managers and shareholders. Because managers still make or can influence the decision whether or when to file a bankruptcy petition, we hypothesize that anticipation of bankruptcy under these new conditions will result in a delay in filing, increased leverage, increased secured debt, and a reduction of asset value for firms at the time they file. We present empirical evidence consistent with our hypotheses.

Number of Pages in PDF File: 36

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

JEL Classification: D21, G33, K22

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Date posted: October 31, 2008 ; Last revised: June 28, 2014

Suggested Citation

Adler, Barry E. and Capkun , Vedran and Weiss, Lawrence A., Value Destruction in the New Era of Chapter 11 (February 6, 2012). Journal of Law, Economics, & Organization (2013) 29 (2): 461-483. 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 (Contact Author)
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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