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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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- White, Michelle J, 1989. "The Corporate Bankruptcy Decision," Journal of Economic Perspectives, American Economic Association, vol. 3(2), pages 129-51, Spring.
- 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.
- 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.
- 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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