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Are the bankrupt skies the friendliest?

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  • Ciliberto, Federico
  • Schenone, Carola

Abstract

We use data from the US airline industry to investigate whether firms that are under bankruptcy protection, as well as these firm's product market rivals, change the quality of the products they offer. We measure the quality of the services offered by a carrier using flight cancelations and delays, and the age of the aircraft used by the carrier. We find that delays and cancelations are less frequent during bankruptcy filings but return to their pre-bankruptcy levels once the bankrupt firm emerges from bankruptcy. We also find that firms use Chapter 11 filings to permanently reduce the age of their fleet. We do not find evidence of statistically and economically significant changes by the airline's competitors along any of the dimensions above.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Corporate Finance.

Volume (Year): 18 (2012)
Issue (Month): 5 ()
Pages: 1217-1231

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Handle: RePEc:eee:corfin:v:18:y:2012:i:5:p:1217-1231

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Web page: http://www.elsevier.com/locate/jcorpfin

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Keywords: Bankruptcy; Chapter 11; Product market quality; Airline industry;

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Cited by:
  1. Gordon M. Phillips & Giorgo Sertsios, 2011. "How Do Firm Financial Conditions Affect Product Quality and Pricing?," NBER Working Papers 17233, National Bureau of Economic Research, Inc.

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