Bankruptcy Auctions: Costs, Debt Recovery, and Firm Survival
Posted: 11 Jul 1999
Date Written: April 1999
This paper provides large-sample evidence on the Swedish auction bankruptcy system. Compared to U.S. Chapter 11, bankruptcy auctions are substantially quicker and have lower costs. Three-quarters of the firms survive the auction as going concern, which is similar to Chapter 11 survival rates. Also, based on market values, auctions produce total debt recovery rates that are comparable to recovery rates in Chapter 11 reorganizations. The cash settlement enforces adherence to absolute priority rules. Overall, the evidence provides little support for the view that auction bankruptcy causes managers to delay filing relative to what happens under the U.S. reorganization code.
JEL Classification: G3
Suggested Citation: Suggested Citation