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Chapter 11 bankruptcy outcomes and gubernatorial election cycles

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  • Breuer, Wolfgang
  • Haas, Simon
  • Knetsch, Andreas

Abstract

We find that Chapter 11 bankruptcy cases are more likely to result in emergence if decided shortly before a gubernatorial election, where the incumbent seeks re-election. However, firms emerging from bankruptcy during this period have a lower chance of long-term survival. This suggests that governors promote the survival of bankrupt firms, even those without a sustainable business model, to enhance their re-election prospects. Governors support bankrupt firms by influencing court decision-makers – particularly judges. A key motive for such gubernatorial intervention is to secure the votes of employees affected by bankruptcy.

Suggested Citation

  • Breuer, Wolfgang & Haas, Simon & Knetsch, Andreas, 2025. "Chapter 11 bankruptcy outcomes and gubernatorial election cycles," Finance Research Letters, Elsevier, vol. 82(C).
    • Handle: RePEc:eee:finlet:v:82:y:2025:i:c:s1544612325007822
    DOI: 10.1016/j.frl.2025.107523
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    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior

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