Do the Right Firms Survive Bankruptcy?

88 Pages Posted: 30 May 2019 Last revised: 23 Dec 2019

See all articles by Samuel Antill

Samuel Antill

Stanford Graduate School of Business

Date Written: December 22, 2019


In U.S. Chapter 11 bankruptcy cases, some firms are liquidated. Others emerge and continue operating. I show that inefficient decisions to liquidate cost creditors billions of dollars every year. Using a sample of large-firm Chapter 11 cases, I exploit the within-district random assignment of bankruptcy judges to estimate a structural model of bankruptcy. In contrast to conventional wisdom suggesting that Chapter 11 is biased towards continuation, I estimate that liquidation was inefficiently chosen in 22% of the cases in my sample. Expected creditor recovery would have been significantly higher if these firms had emerged. Liquidations involving “363 sales,” in which managers sell assets without creditor approval, are especially likely to be inefficient. Estimates from a counterfactual exercise reveal that courts could dramatically improve creditor recovery by assigning liquidations using a statistical model.

Keywords: bankruptcy, recovery rate, structural estimation, Roy model, 363 sales

JEL Classification: G33, G38, K22

Suggested Citation

Antill, Samuel, Do the Right Firms Survive Bankruptcy? (December 22, 2019). Available at SSRN: or

Samuel Antill (Contact Author)

Stanford Graduate School of Business ( email )

Stanford, CA 94305
United States

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