Will the Bankruptcy Reform Work? An Empirical Analysis of Financial Reorganization in Canada
The new Bankruptcy Act has two clear aims: (i) to increase the number of firms opting for reorganization over liquidation, and (ii) to increase protection for wage earners at bankrupt firms. The paper examines a unique micro data set of 338 commercial financial reorganization proposals filed in Canada during the period 1978-87 to determine whether these aims are likely to be met. Estimates from a logit model of reorganization plan acceptance indicate that the new Act will result in a roughly 7 percentage point increase in the number of reorganization plans that creditors accept. Everything else being equal, these changes are estimated to save about 120 jobs per year in Canada. Thus, while the new Act will increase the rate at which creditors accept reorganization plans, the actual impact of a higher acceptance rate will be quite small.
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Volume (Year): 20 (1994)
Issue (Month): 3 (September)
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- Takeo Hoshi & Anil Kashyap & David Scharfstein, 1990.
"The Role of Banks in Reducing the Costs of Financial Distress in Japan,"
NBER Working Papers
3435, National Bureau of Economic Research, Inc.
- Hoshi, Takeo & Kashyap, Anil & Scharfstein, David, 1990. "The role of banks in reducing the costs of financial distress in Japan," Journal of Financial Economics, Elsevier, vol. 27(1), pages 67-88, September.
- White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
- Jocelyn Martel, 1991. "Bankruptcy Law and the Canadian Experience: An Economic Appraisal," Canadian Public Policy, University of Toronto Press, vol. 17(1), pages 52-63, March.
- Gunderson, Morley & Kervin, John & Reid, Frank, 1986. "Logit Estimates of Strike Incidence from Canadian Contract Data," Journal of Labor Economics, University of Chicago Press, vol. 4(2), pages 257-76, April.
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