Chapter 11: Duration, Outcome, and Post-Reorganization Performance
Diane K. Denis
University of Pittsburgh - Katz School of Business
Kimberly Rodgers Cornaggia
Pennsylvania State University - Department of Finance
March 1, 2007
Journal of Financial and Quantitative Analysis Vol. 42, No. 01, pp. 101-118.
AFA 2003 Washington, DC Meetings
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.
Note: Previously titled "Economic Viability and Chapter 11 Outcomes"
Number of Pages in PDF File: 35
Keywords: Chapter 11, reorganization
JEL Classification: G33
Date posted: November 2, 2005 ; Last revised: March 18, 2014