Assessing Post-Bankruptcy Performance: An Analysis of Reorganized Firms' Cash Flows

Financial Management, Vol. 28, Iss. 2, Summer 1999

Posted: 6 Sep 2001

See all articles by Michael J. Alderson

Michael J. Alderson

Saint Louis University - Richard A. Chaifetz School of Business

Brian L. Betker

Saint Louis University

Abstract

We analyze the post-bankruptcy cash flows for a sample of firms that emerged from Chapter 11 reorganization between 1983 and 1993. We evaluate the rate of return available to investors who owned all of the debt and equity claims on the firm as it emerged from bankruptcy. On average, this return matches the performance of benchmark portfolios during the five years following emergence. Although post-bankruptcy operating margins are poor, the market appears to assess accurately the firm's prospects at the time it emerges from bankruptcy. Superior returns are generated by high-growth-option firms that invest heavily following emergence from bankruptcy.

Suggested Citation

Alderson, Michael J. and Betker, Brian L., Assessing Post-Bankruptcy Performance: An Analysis of Reorganized Firms' Cash Flows. Financial Management, Vol. 28, Iss. 2, Summer 1999, Available at SSRN: https://ssrn.com/abstract=267694

Michael J. Alderson (Contact Author)

Saint Louis University - Richard A. Chaifetz School of Business ( email )

3674 Lindell Blvd
St. Louis, MO 63108-3397
United States
314-977-8169 (Phone)
314-977-3897 (Fax)

Brian L. Betker

Saint Louis University ( email )

St. Louis, MO 63108-3397
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
1,312
PlumX Metrics