Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy
University of British Columbia - Sauder School of Business; China Academy of Financial Research (CAFR)
University of British Columbia, Finance Working Paper No. 99-1
Sauder School of Business Working Paper
This paper examines the determinants of the length of time high yield debt issuing companies spend in Chapter 11 bankruptcy. Through a model of the instantaneous probability hazard rate of a firm's emergence from Chapter 11 we find that the length of Chapter 11 bankruptcy is significantly affected by a firm's choice of the prepackaged Chapter 11 the time it spends in pre-Chapter 11 negotiation the interruption of legal disputes its gross profit margin size and the changing bankruptcy environment in the 1990s. We also conclude that for a representative sample firm the time it spends in Chapter 11 increases its instantaneous probability of completing Chapter 11 up to its twenty-first month in Chapter 11. After that this instantaneous probability of exiting Chapter 11 declines towards zero.
Number of Pages in PDF File: 12
JEL Classification: C41, G33working papers series
Date posted: March 2, 1999
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