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Chapter 11: Duration, Outcome, and Post-Reorganization Performance

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  • Denis, Diane K.
  • Rodgers, Kimberly J.

Abstract

We find that among firms that file Chapter 11 those that are smaller have better operating performance, and are in higher operating margin industries spend less time in Chapter 11. Firms are more likely to emerge as going concerns and to achieve positive post reorganization profitability if they significantly reduce assets and liabilities while in Chapter 11. Higher pre-bankruptcy industry-adjusted operating margins and improvements in margin are associated with post-reorganization profitability but do not impact the decision to reorganize. These results reveal characteristics and actions associated with successful reorganizations and, furthermore, suggest that Chapter 11 allows promising firms to successfully reorganize.

Suggested Citation

  • Denis, Diane K. & Rodgers, Kimberly J., 2007. "Chapter 11: Duration, Outcome, and Post-Reorganization Performance," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 42(01), pages 101-118, March.
  • Handle: RePEc:cup:jfinqa:v:42:y:2007:i:01:p:101-118_00
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    Cited by:

    1. Annabi, Amira & Breton, Michèle & François, Pascal, 2012. "Resolution of financial distress under Chapter 11," Journal of Economic Dynamics and Control, Elsevier, vol. 36(12), pages 1867-1887.
    2. repec:spr:busres:v:10:y:2017:i:1:d:10.1007_s40685-016-0041-8 is not listed on IDEAS
    3. Sofie Balcaen & Sophie Manigart & Hubert Ooghe, 2011. "From distress to exit: determinants of the time to exit," Journal of Evolutionary Economics, Springer, vol. 21(3), pages 407-446, August.
    4. Li, Kai & Wang, Wei, 2016. "Debtor-in-possession financing, loan-to-loan, and loan-to-own," Journal of Corporate Finance, Elsevier, vol. 39(C), pages 121-138.
    5. Bonfim, Diana & Dias, Daniel A. & Richmond, Christine, 2012. "What happens after corporate default? Stylized facts on access to credit," Journal of Banking & Finance, Elsevier, vol. 36(7), pages 2007-2025.
    6. Jun Xia & David D. Dawley & Han Jiang & Rong Ma & Kimberly B. Boal, 2016. "Resolving a dilemma of signaling bankrupt-firm emergence: A dynamic integrative view," Strategic Management Journal, Wiley Blackwell, vol. 37(8), pages 1754-1764, August.
    7. Madura, Jeff & Ngo, Thanh & Viale, Ariel M., 2012. "Why do merger premiums vary across industries and over time?," The Quarterly Review of Economics and Finance, Elsevier, vol. 52(1), pages 49-62.
    8. Jiang, Zhan & Kim, Kenneth A. & Zhang, Hao, 2014. "The effects of corporate bailout on firm performance: International evidence," Journal of Banking & Finance, Elsevier, vol. 43(C), pages 78-96.
    9. Dewaelheyns, Nico & Van Hulle, Cynthia, 2009. "Filtering speed in a Continental European reorganization procedure," International Review of Law and Economics, Elsevier, vol. 29(4), pages 375-387, December.
    10. Huang, Jiang-Chuan & Huang, Chin-Sheng & You, Chun-Fan, 2015. "Bank relationships and the likelihood of filing for reorganization," International Review of Economics & Finance, Elsevier, vol. 35(C), pages 278-291.
    11. Chien-An Wang, 2012. "Determinants of the Choice of Formal Bankruptcy Procedure: An International Comparison of Reorganization and Liquidation," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(2), pages 4-28, March.
    12. Betz, Jennifer & Kellner, Ralf & Rösch, Daniel, 2016. "What drives the time to resolution of defaulted bank loans?," Finance Research Letters, Elsevier, vol. 18(C), pages 7-31.
    13. Lara Abdel Fattah & Sylvain Barthélémy & Nadine Levratto & Benjamin Trempont, 2016. "Post-reorganization survival: a semi-parametric and non-parametric analysis of firm characteristics," EconomiX Working Papers 2016-22, University of Paris Nanterre, EconomiX.
    14. Pascal François & Alon Raviv, 2014. "Heterogeneous Beliefs and the Choice Between Private Restructuring and Formal Bankruptcy," Cahiers de recherche 1401, CIRPEE.
    15. Jiang-Chuan Huang & Chin-Sheng Huang & Hueh-Chen Lin, 2013. "Firm Debt Renegotiation, Reorganization Filing and Bank Relationships," International Finance, Wiley Blackwell, vol. 16(3), pages 393-422, December.
    16. repec:eee:riibaf:v:42:y:2017:i:c:p:161-172 is not listed on IDEAS
    17. Chien-An Wang, 2012. "Determinants of the Choice of Formal Bankruptcy Procedure: An International Comparison of Reorganization and Liquidation," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 48(2), pages 4-28, March.

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