Serial Bankruptcy: Plan Infeasibility or Just Bad Luck?
9 Pages Posted: 14 Aug 2013
Date Written: 2001
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.
JEL Classification: K00
Suggested Citation: Suggested Citation