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Postbankruptcy Performance and Management Turnover

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Author Info
 Hotchkiss, Edith Shwalb
Abstract

This article examines the performance of 197 public companies that emerged from Chapter 11. Over 40 percent of the sample firms continue to experience operating losses in the three years following bankruptcy; 32 percent reenter bankruptcy or privately restructure their debt. The continued involvement of prebankruptcy management in the restructuring process is strongly associated with poor postbankruptcy performance. The substantial number of firms emerging from Chapter 11 that are not viable or need further restructuring provides little evidence that the process effectively rehabilitates distressed firms and is consistent with the view that there are economically important biases toward continuation of unprofitable firms. Copyright 1995 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 50 (1995)
Issue (Month): 1 (March)
Pages: 3-21
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Handle: RePEc:bla:jfinan:v:50:y:1995:i:1:p:3-21

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  5. Couwenberg, O. & Jong, A. de, 2007. "Costs and Recovery Rates in the Dutch Liquidation-Based Bankruptcy System," Research Paper ERS-2007-041-F&A Revision, Erasmus Research Institute of Management (ERIM), ERIM is the joint research institute of the Rotterdam School of Management, Erasmus University and the Erasmus School of Economics (ESE) at Erasmus Uni. [Downloadable!]
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  9. Lucian Arye Bebchuk, 2000. "Using Options to Divide Value in Corporate Bankruptcy," NBER Working Papers 7614, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Kenneth Ayotte & David Skeel, . "Why Do Distressed Companies Choose Delaware? An Empirical Analysis of Venue Choice in Bankruptcy," Scholarship at Penn Law upenn_wps-1023, University of Pennsylvania Law School. [Downloadable!]
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