On Direct Bankruptcy Costs and the Firm's Bankruptcy Decision
12 Pages Posted: 12 Jan 2001
Date Written: January 2001
Using firm-level information on 622 commercial bankruptcies filed under Canadian law (324 liquidating firms and 298 reorganizing firms) and controlling for a variety of firm-specific factors, we find there is no difference in direct bankruptcy costs between liquidation and reorganization. We argue that if bankruptcy costs do have an impact on a firm's bankruptcy decision, it can only be through differences in indirect bankruptcy costs.
Keywords: Bankruptcy costs, liquidation, reorganization
JEL Classification: G33, G38
Suggested Citation: Suggested Citation