The Costs of Bankruptcy

81 Pages Posted: 7 Dec 2005

See all articles by Arturo Bris

Arturo Bris

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

Ivo Welch

University of California, Los Angeles (UCLA); National Bureau of Economic Research (NBER)

Ning Zhu

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

Abstract

Our paper explores a comprehensive sample of 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 appear no faster or cheaper (in terms of direct expense) than Chapter 11 bankruptcies. But Chapter 11 seems to preserve assets better, and thereby allows creditors to recover relatively more. Our paper also provides a large number of further empirical regularities.

JEL Classification: G33, K22, G28

Suggested Citation

Bris, Arturo and Welch, Ivo and Zhu, Ning, The Costs of Bankruptcy. Journal of Finance, Forthcoming, Yale ICF Working Paper No. 04-13, AFA 2005 Philadelphia Meetings Paper, Available at SSRN: https://ssrn.com/abstract=868568

Arturo Bris (Contact Author)

IMD International ( email )

Ch. de Bellerive 23
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Switzerland

European Corporate Governance Institute (ECGI)

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Yale University - International Center for Finance ( email )

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Ivo Welch

University of California, Los Angeles (UCLA) ( email )

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HOME PAGE: http://www.ivo-welch.info

National Bureau of Economic Research (NBER)

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Ning Zhu

China Academy of Financial Research (CAFR)

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Shanghai P.R.China, 200030
China

Yale School of Management ( email )

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

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

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530-752-2924 (Fax)

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

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