Serial Bankruptcy: Plan Infeasibility or Just Bad Luck?

9 Pages Posted: 14 Aug 2013

See all articles by Karen Craft Denning

Karen Craft Denning

Fairleigh-Dickinson University - Silberman College of Business

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance

Robert M. Lawless

University of Illinois College of Law

Date Written: 2001

Abstract

Through a comparison of serially and once bankrupt firms, we examine those factors that lead to a successful reorganization. We find that serially bankrupt firms generally fail to restructure their top management around the time of their initial reorganization while over 70% of our sample of once bankrupt firms replace their senior executives. Serially bankrupt firms engage in more extensive capital structure changes following reorganization than once bankrupt firms. We further find that firm growth, performance and size are associated with a greater likelihood of a successful reorganization. Firm risk as measured by financial leverage increases the probability of a subsequent bankruptcy.

Keywords: bankruptcy

JEL Classification: K00

Suggested Citation

Denning, Karen Craft and Ferris, Stephen P. and Lawless, Robert M., Serial Bankruptcy: Plan Infeasibility or Just Bad Luck? (2001). Applied Economics Letters, Vol. 8, No. 105, 2001. Available at SSRN: https://ssrn.com/abstract=2309626

Karen Craft Denning

Fairleigh-Dickinson University - Silberman College of Business

Madison, NJ 07940
United States
201-692-7294 (Phone)

Stephen P. Ferris

University of Missouri at Columbia - Department of Finance ( email )

214 Middlebush Hall
Columbia, MO 65211
United States
573-882-6272 (Phone)
573-884-6296 (Fax)

Robert M. Lawless (Contact Author)

University of Illinois College of Law ( email )

504 E. Pennsylvania Avenue
Champaign, IL 61820
United States

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