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Duration analysis of corporate bankruptcy in the presence of competing risks

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  • Sehoon Kwon
  • Sang Buhm Hahn

Abstract

The bankruptcy duration of reorganized firms should be different from that of failed firms. Adopting a competing risk model and using the Korean corporate bankruptcy data, we confirm the differences in reorganized and failed cases. We find that the failure decision of bigger firms seems delayed (the too-big-to-fail-too-early hypothesis). In systemic bankruptcy, the bankruptcy period is shortened and the reorganization bias is increased (Super Chapter 11 principle). Also, if bankruptcy is filed in a poor business environment, reorganization may occur faster and failure slower for that company (handicapped signal theory).

Suggested Citation

  • Sehoon Kwon & Sang Buhm Hahn, 2010. "Duration analysis of corporate bankruptcy in the presence of competing risks," Applied Economics Letters, Taylor & Francis Journals, vol. 17(15), pages 1513-1516.
    • Handle: RePEc:taf:apeclt:v:17:y:2010:i:15:p:1513-1516
    DOI: 10.1080/13504850903035840
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    Cited by:

    1. Lara Wemans & Manuel Coutinho Pereira, 2022. "Characteristics of parties and duration of insolvency cases in Portugal," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    2. Goodwin, John & Routledge, James, 2021. "Determinants of the duration of the voluntary administration process: An unconditional quantile regression analysis," Journal of Contemporary Accounting and Economics, Elsevier, vol. 17(3).

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