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Chapter 11: Duration, Outcome, and Post-Reorganization Performance

35 Pages Posted: 2 Nov 2005 Last revised: 18 Mar 2014

Diane K. Denis

University of Pittsburgh - Katz School of Business

Kimberly Rodgers Cornaggia

Pennsylvania State University - Department of Finance

Date Written: March 1, 2007

Abstract

We find that among firms that file Chapter 11 those that are smaller, have better operating performance, and are in higher-operating-margin industries spend less time in Chapter 11. Firms are more likely to emerge as going concerns and to achieve positive post-reorganization profitability if they significantly reduce assets and liabilities while in Chapter 11. Higher pre-bankruptcy industry-adjusted operating margins and improvements in margin are associated with post-reorganization profitability but do not impact the decision to reorganize. These results reveal characteristics and actions associated with successful reorganizations. Furthermore, they suggest that Chapter 11 allows promising firms to successfully reorganize.

Notes: Previously titled "Economic Viability and Chapter 11 Outcomes"

Keywords: Chapter 11, reorganization

JEL Classification: G33

Suggested Citation

Denis, Diane K. and Cornaggia, Kimberly Rodgers, Chapter 11: Duration, Outcome, and Post-Reorganization Performance (March 1, 2007). Journal of Financial and Quantitative Analysis Vol. 42, No. 01, pp. 101-118.; AFA 2003 Washington, DC Meetings. Available at SSRN: https://ssrn.com/abstract=824824 or http://dx.doi.org/10.2139/ssrn.334901

Diane K. Denis (Contact Author)

University of Pittsburgh - Katz School of Business ( email )

368B Mervis Hall
Pittsburgh, PA 15260
United States
412-624-0296 (Phone)

Kimberly Rodgers Cornaggia

Pennsylvania State University - Department of Finance ( email )

306 Business Bldg
University Park, PA 16802
United States
814-865-2243 (Phone)
814-865-3362 (Fax)

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