Chapter 11 bankruptcy outcomes and gubernatorial election cycles

22 Pages Posted: 13 Dec 2024

See all articles by Wolfgang Breuer

Wolfgang Breuer

RWTH Aachen University

Simon Haas

RWTH Aachen University

Andreas Knetsch

Leibniz Institute for Financial Research SAFE; RWTH Aachen University

Date Written: November 22, 2024

Abstract

We find that Chapter 11 bankruptcy cases are more likely to result in emergence if decided shortly before a gubernatorial election, where the incumbent governor seeks re-election. However, firms emerging from bankruptcy during this period have a lower chance of long-term survival. These results suggest that governors promote the survival of bankrupt firms, even those without a sustainable business model, to increase their own chances of re-election. Consistent with governors trying to win the votes of employees, we find that gubernatorial interference increases when unemployment is high. One way governors support bankrupt firms is by securing them funding.

Keywords: Chapter 11 bankruptcy, gubernatorial influence, election cycle JEL codes: G33

JEL Classification: G33, D72

Suggested Citation

Breuer, Wolfgang and Haas, Simon and Knetsch, Andreas, Chapter 11 bankruptcy outcomes and gubernatorial election cycles (November 22, 2024). Available at SSRN: https://ssrn.com/abstract=5030678 or http://dx.doi.org/10.2139/ssrn.5030678

Wolfgang Breuer

RWTH Aachen University ( email )

Templergraben 55
D-52056 Aachen, 52056
Germany

Simon Haas

RWTH Aachen University ( email )

Andreas Knetsch (Contact Author)

Leibniz Institute for Financial Research SAFE ( email )

(http://www.safe-frankfurt.de)
Theodor-W.-Adorno-Platz 3
Frankfurt am Main, 60323
Germany

RWTH Aachen University ( email )

Templergraben 55
52056 Aachen, 52056
Germany

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