The Changing Nature of Chapter 11

Bharath, Sreedhar T.; Panchapagesan, Venkatesh; Werner, Ingrid M.

doi:10.2139/ssrn.2443248

The Changing Nature of Chapter 11

IIM Bangalore Research Paper No. 461

42 Pages Posted: 29 May 2014

See all articles by Sreedhar T. Bharath

Sreedhar T. Bharath

Arizona State University (ASU) - Finance Department

Venkatesh Panchapagesan

Indian Institute of Management (IIMB), Bangalore

Ingrid M. Werner

The Ohio State University - Fisher College of Business

There are 2 versions of this paper

Date Written: May 29, 2014

Abstract

The U.S. Chapter 11 bankruptcy has traditionally been viewed as equity friendly, with frequent absolute priority deviations (APDs) in favor of equity. By contrast, based on a more recent sample we find that both APDs and time spent in bankruptcy have declined dramatically. We hypothesize and confirm that innovations in the bankruptcy process, such as reliance on debtor-in-possession (DIP) financing and adoptions of key employee retention plans (KERPs) help explain this decline. We conclude that while the letter of bankruptcy law has not changed, Chapter 11 outcomes have become more creditor friendly in recent years.

Keywords: Bankruptcy, APR violations, Chapter 11

Suggested Citation: Suggested Citation

Bharath, Sreedhar T. and Panchapagesan, Venkatesh and Werner, Ingrid M., The Changing Nature of Chapter 11 (May 29, 2014). IIM Bangalore Research Paper No. 461. Available at SSRN: https://ssrn.com/abstract=2443248 or http://dx.doi.org/10.2139/ssrn.2443248