Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy

Li, Kai

doi:10.2139/ssrn.152308

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Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy

University of British Columbia, Finance Working Paper No. 99-1

Sauder School of Business Working Paper

12 Pages Posted: 2 Mar 1999

See all articles by Kai Li

Kai Li

University of British Columbia (UBC) - Sauder School of Business; Asian Bureau of Finance and Economic Research (ABFER); China Academy of Financial Research (CAFR); European Corporate Governance Institute (ECGI); Canadian Sustainable Finance Network (CSFN)

There are 2 versions of this paper

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

Li, Kai, Bayesian Analysis of Duration Models: An Application to Chapter 11 Bankruptcy (February 1999). University of British Columbia, Finance Working Paper No. 99-1, Sauder School of Business Working Paper, Available at SSRN: https://ssrn.com/abstract=152308 or http://dx.doi.org/10.2139/ssrn.152308