Do the Right Firms Survive Bankruptcy?

112 Pages Posted: 30 May 2019 Last revised: 16 Sep 2020

Date Written: September 15, 2020


In U.S. Chapter 11 bankruptcy cases, some firms are liquidated. Others emerge and continue operating. I show that liquidations 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 21% of the cases in my sample concluded with a liquidation that reduced 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? (September 15, 2020). 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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