The Costs of Bankruptcy Chapter 7 Cash Auctions vs. Chapter 11 Bargaining

Abstract

Our paper explores a comprehensive sample of both small and large corporate bankruptcies in Arizona and New York from 1995-2001. We find that bankruptcy costs are very heterogeneous and sensitive to measurement method. Still, Chapter 7 liquidations seem more expensive in direct and equally expensive in indirect costs, than Chapter 11 bankruptcies. The paper provides a large number of further empirical regularities.