Publications
Publications
- Journal of Financial Economics
Do the Right Firms Survive Bankruptcy?
By: Samuel Antill
Abstract
In U.S. Chapter 11 bankruptcy cases, firms are either reorganized, acquired, or liquidated. I show that decisions to liquidate often reduce creditor recovery, costing creditors billions of dollars every year. I exploit the within-district random assignment of bankruptcy judges to estimate a structural model of bankruptcy. I estimate that liquidation is frequently chosen when a reorganization would have maximized total creditor recovery. Liquidations involving "363 sales," in which managers sell assets without creditor approval, are especially harmful for creditors. I estimate that courts could dramatically improve creditor recovery by assigning liquidations using a statistical model.
Keywords
Bankruptcy; Bankruptcy Reorganization; Recovery Rate; Structural Estimation; Roy Model; 363 Sales; Insolvency and Bankruptcy; Governing Rules, Regulations, and Reforms
Citation
Antill, Samuel. "Do the Right Firms Survive Bankruptcy?" Journal of Financial Economics 144, no. 2 (May 2022): 523–546.