The Dynamics of Large and Small Chapter 11 Cases: An Empirical Study

43 Pages Posted: 19 Feb 2007  

Douglas G. Baird

University of Chicago Law School

Arturo Bris

IMD International; European Corporate Governance Institute (ECGI); Yale University - International Center for Finance

Ning Zhu

China Academy of Financial Research (CAFR); Yale School of Management; University of California, Davis - Graduate School of Management

Date Written: January 2007

Abstract

This paper shows that the dynamics of Chapter 11 turn dramatically on the size of the business. The vast majority of the assets administered in Chapter 11 are concentrated in a handful of large cases, but most of the businesses in Chapter 11 are small, and the smaller the business, the smaller the distribution to general unsecured creditors. For businesses with assets above $5 million, unsecured creditors typically collect half of what they are owed. Where the business's assets are worth less than $200,000, ordinary general creditors usually recover nothing. In the typical small Chapter 11 case, the tax collector is the central figure. In small business bankruptcies, priority tax liabilities are the largest unsecured liabilities of the business. Tax obligations are entitled to priority and are obligations of both the corporation and those who run it. Given the large shadow tax claims cast over small Chapter 11 reorganizations, accounts of small Chapter 11 must focus squarely on them.

Keywords: bankruptcy, creditors, Chapter 11

JEL Classification: G32, G38, K22

Suggested Citation

Baird, Douglas G. and Bris, Arturo and Zhu, Ning, The Dynamics of Large and Small Chapter 11 Cases: An Empirical Study (January 2007). Yale ICF Working Paper No. 05-29; ECGI - Finance Working Paper No. 107/2005; AFA 2008 New Orleans Meetings Paper. Available at SSRN: https://ssrn.com/abstract=866865 or http://dx.doi.org/10.2139/ssrn.866865

Douglas G. Baird

University of Chicago Law School ( email )

1111 E. 60th St.
Chicago, IL 60637
United States
773-702-9571 (Phone)
773-702-0730 (Fax)

Arturo Bris (Contact Author)

IMD International ( email )

Ch. de Bellerive 23
P.O. Box 915
CH-1001 Lausanne
Switzerland

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://www.ecgi.org

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States

Ning Zhu

China Academy of Financial Research (CAFR)

1954 Huashan Road
Shanghai P.R.China, 200030
China

Yale School of Management ( email )

135 Prospect Street
Box 208200
New Haven, CT 06520-8200
United States

HOME PAGE: http://pantheon.yale.edu/~nz26/

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States
530-752-3871 (Phone)
530-752-2924 (Fax)

HOME PAGE: http://www.gsm.ucdavis.edu/Faculty/Zhu/

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