Bankrupt Family Firms

45 Pages Posted: 17 Feb 2015 Last revised: 15 Oct 2016

See all articles by Massimo Massa

Massimo Massa

INSEAD - Finance

Alminas Zaldokas

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Date Written: October 14, 2016


We study the role of family ownership during the bankruptcy process. We argue that at times of distress family blockholders are better positioned to manage the firm and this is appreciated by minority shareholders and lenders alike. We test this hypothesis focusing on the sample of public US corporations between 2001 and 2008. First, we show that family firms are less engaged in forum shopping, emerge from bankruptcy faster and have higher recovery rates on debt. We further show that this translates into smaller drops in stock prices around bankruptcy filings, and has implications for ex-ante borrowing yields.

Keywords: Family Firms, Control Blocks, Bankruptcy, Agency Costs of Debt, Inheritance Taxes

JEL Classification: G32, G34

Suggested Citation

Massa, Massimo and Zaldokas, Alminas, Bankrupt Family Firms (October 14, 2016). INSEAD Working Paper No. 2016/70/FIN. Available at SSRN: or

Massimo Massa

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 6072 4481 (Phone)
+33 1 6072 4045 (Fax)

Alminas Zaldokas (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong

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