IDEAS home Printed from https://ideas.repec.org/a/oup/jleorg/v29y2013i2p461-483.html
   My bibliography  Save this article

Value Destruction in the New Era of Chapter 11

Author

Listed:
  • Barry E. Adler
  • Vedran Capkun
  • Lawrence A. Weiss

Abstract

Over the past two decades, control over the US bankruptcy reorganization process has shifted from a debtor's pre-bankruptcy managers to holders of secured claims. The result has been increased adherence to absolute priority and a harder landing for the debtor's managers and shareholders. Because managers still make or can influence the decision whether or when to file a bankruptcy petition, we hypothesize that anticipation of bankruptcy under these new conditions will result in a delay in filing, increased leverage, increased secured debt, and a reduction of asset value for firms at the time they file. We present empirical evidence consistent with our hypotheses. The Author 2012. Published by Oxford University Press on behalf of Yale University. All rights reserved. For Permissions, please email: journals.permissions@oup.com, Oxford University Press.

Suggested Citation

  • Barry E. Adler & Vedran Capkun & Lawrence A. Weiss, 2013. "Value Destruction in the New Era of Chapter 11," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 29(2), pages 461-483, April.
    • Handle: RePEc:oup:jleorg:v:29:y:2013:i:2:p:461-483
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/jleo/ewr004
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dinev, Nikolay, 2017. "Voluntary Bankruptcy as Preemptive Persuasion," Economics Series 334, Institute for Advanced Studies.
    2. Ms. Rima A Turk, 2015. "Financial Decisions and Investment Outcomes in Developing Countries: The Role of Institutions," IMF Working Papers 2015/038, International Monetary Fund.
    3. Nieto-Carrillo, Ernesto & Carreira, Carlos & Teixeira, Paulino, 2022. "Giving zombie firms a second chance: An assessment of the reform of the Portuguese insolvency framework," Economic Analysis and Policy, Elsevier, vol. 76(C), pages 156-181.
    4. Jaka Cepec & Mitja Kovac, 2016. "Carrots and Sticks as Incentive Mechanisms for the Optimal Initiation of Insolvency Proceedings," DANUBE: Law and Economics Review, European Association Comenius - EACO, issue 2, pages 79-103, June.
    5. François, Pascal & Naqvi, Hassan, 2023. "Secured and unsecured debt in creditor-friendly bankruptcy," Journal of Corporate Finance, Elsevier, vol. 80(C).
    6. Meradj Mortezapouraghdam, 2016. "Three Essays on the Role of Frictions in the Economy," Sciences Po publications info:hdl:2441/293qice3lj8, Sciences Po.
    7. Annabi, Amira & Breton, Michèle & François, Pascal, 2021. "Could Chapter 11 redeem itself? Wealth and welfare effects of the redemption option," International Review of Law and Economics, Elsevier, vol. 67(C).
    8. repec:hal:spmain:info:hdl:2441/293qice3lj861rvos9ns14n0h0 is not listed on IDEAS
    9. Meradj Morteza Pouraghdam, 2016. "Three essays on the role of frictions in the economy [Trois essais sur le rôle du désaccord en économie]," SciencePo Working papers tel-03498781, HAL.
    10. Zorn, Michelle L. & Norman, Patricia M. & Butler, Frank C. & Bhussar, Manjot S., 2017. "Cure or curse: Does downsizing increase the likelihood of bankruptcy?," Journal of Business Research, Elsevier, vol. 76(C), pages 24-33.
    11. Capkun, Vedran & Ors, Evren, 2021. "Replacing key employee retention plans with incentive plans in bankruptcy," Accounting, Organizations and Society, Elsevier, vol. 94(C).
    12. Chu, Yongqiang, 2017. "Shareholder litigation, shareholder–creditor conflict, and the cost of bank loans," Journal of Corporate Finance, Elsevier, vol. 45(C), pages 318-332.
    13. Barry E. Adler & Vedran Capkun, 2023. "Secured credit and bankruptcy resolution," Journal of Empirical Legal Studies, John Wiley & Sons, vol. 20(4), pages 719-745, December.
    14. Bian, Bo, 2020. "Globally Consistent Creditor Protection, Reallocation, and Productivity," LawFin Working Paper Series 6, Goethe University, Center for Advanced Studies on the Foundations of Law and Finance (LawFin).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:jleorg:v:29:y:2013:i:2:p:461-483. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://academic.oup.com/jleo .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.