Do the Right Firms Survive Bankruptcy?

73 Pages Posted: 30 May 2019 Last revised: 9 Apr 2021

Date Written: April 8, 2021


In U.S. Chapter 11 bankruptcy cases, firms are either reorganized, acquired, or liquidated. I show that decisions to liquidate often reduce creditor recovery, costing creditors billions of dollars every year. I exploit the within-district random assignment of bankruptcy judges to estimate a structural model of bankruptcy. I estimate that liquidation is frequently chosen when a reorganization would have maximized total creditor recovery. Liquidations involving "363 sales," in which managers sell assets without creditor approval, are especially harmful for creditors. I estimate 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? (April 8, 2021). Available at SSRN: or

Samuel Antill (Contact Author)

Harvard Business School ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

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