Asset Efficiency and Reallocation Decisions of Bankrupt Firms

45 Pages Posted: 23 Jul 1998

See all articles by Vojislav Maksimovic

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business

Gordon M. Phillips

Dartmouth College - Tuck School of Business; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: October 1997

Abstract

This paper investigates whether Chapter 11 bankruptcy provides a mechanism by which insolvent firms are efficiently reorganized and the assets of unproductive firms are effectively redeployed. We argue that incentives to reorganize depend on the level of demand and industry conditions. Using plant-level data, we find that Chapter 11 status is much less important than industry conditions in explaining the productivity, asset sales and closure conditions of Chapter 11 bankrupt firms. This suggests that firms that elect to enter into Chapter 11 incur few real economic costs.

JEL Classification: G33, G31

Suggested Citation

Maksimovic, Vojislav and Phillips, Gordon M., Asset Efficiency and Reallocation Decisions of Bankrupt Firms (October 1997). Available at SSRN: https://ssrn.com/abstract=100769 or http://dx.doi.org/10.2139/ssrn.100769

Vojislav Maksimovic

University of Maryland - Robert H. Smith School of Business ( email )

Van Munching Hall
College Park, MD 20742-1815
United States
301-405-2125 (Phone)
301-314-9157 (Fax)

HOME PAGE: http://scholar.rhsmith.umd.edu/vmax/home

Gordon M. Phillips (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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