The Costs of Bankruptcy
IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance
UCLA; National Bureau of Economic Research (NBER)
China Academy of Financial Research (CAFR); Yale School of Management; University of California, Davis - Graduate School of Management
Journal of Finance, Forthcoming
Yale ICF Working Paper No. 04-13
AFA 2005 Philadelphia Meetings Paper
Our paper explores a comprehensive sample of small and large corporate bankruptcies in Arizona and New York from 1995-2001. We find that bankruptcy costs are very heterogeneous and sensitive to measurement method. Still, Chapter 7 liquidations appear no faster or cheaper (in terms of direct expense) than Chapter 11 bankruptcies. But Chapter 11 seems to preserve assets better, and thereby allows creditors to recover relatively more. Our paper also provides a large number of further empirical regularities.
Number of Pages in PDF File: 81
JEL Classification: G33, K22, G28
Date posted: December 7, 2005
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