Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy
University of British Columbia, Finance Working Paper No. 99-1
12 Pages Posted: 2 Mar 1999
There are 2 versions of this paper
Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy
Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy
Date Written: February 1999
Abstract
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.
JEL Classification: C41, G33
Suggested Citation: Suggested Citation
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