35 Pages Posted: 2 Nov 2005 Last revised: 18 Mar 2014
Date Written: March 1, 2007
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: 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