Gupta, Jairaj, Barzotto, Mariachiara and de Moura, André Aroldo Freitas (2024) Bankruptcy Resolution:Misery or Strategy. Abacus. abac.12311. ISSN 1467-6281
Abstract
Contrary to conventional wisdom, this study reports the presence of a positive relationship between large United States firms’ leverage levels and their likelihood of emerging from Chapter 11 bankruptcy. In anticipation of a favourable court outcome, which allows them to emerge from bankruptcy with reduced debt, firms tend to increase their leverage levels in the years preceding the bankruptcy filing year. Thus, suggesting strategic abuse of bankruptcy courts and creditors. Test results suggest that firms start acting strategically up to four years before filing for bankruptcy so that they can emerge with a reduced debt burden at the cost of creditors. Additionally, our study also contributes to the corporate bankruptcy literature by exploring a set of factors (related to the firm, judicial, case, geographic, and macroeconomic characteristics) explaining the likelihood of firms emerging from bankruptcy, and proposing a parsimonious multivariate model that best predicts the likelihood of surviving Chapter 11 bankruptcy.
Metadata
Item Type: | Article |
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Authors/Creators: |
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Copyright, Publisher and Additional Information: | © 2024 The Authors |
Dates: |
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Institution: | The University of York |
Academic Units: | The University of York > Faculty of Social Sciences (York) > The York Management School |
Depositing User: | Pure (York) |
Date Deposited: | 30 Oct 2023 16:50 |
Last Modified: | 29 Nov 2024 01:12 |
Published Version: | https://doi.org/10.1111/abac.12311 |
Status: | Published online |
Refereed: | Yes |
Identification Number: | 10.1111/abac.12311 |
Related URLs: | |
Open Archives Initiative ID (OAI ID): | oai:eprints.whiterose.ac.uk:204742 |
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