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Empirical Estimates of Filtering Failure in Court-Supervised reorganization

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  • T.C.G. Fisher
  • J. Martel

Abstract

We present the first comprehensive empirical estimates of filtering failure in court‐supervised reorganization. Using a sample of 303 firms attempting reorganization in Canada during 1977–1988, we find that Type I errors (accepting a plan from a nonviable firm) are four times more likely to occur than Type II errors (rejecting a plan from a viable firm) and that the incidence of filtering failure is between 22 and 53 percent or 18 and 44 percent, depending on the definition of a firm's viability.
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Suggested Citation

  • T.C.G. Fisher & J. Martel, 2000. "Empirical Estimates of Filtering Failure in Court-Supervised reorganization," Thema Working Papers 2000-45, THEMA (Théorie Economique, Modélisation et Applications), CY Cergy-Paris University, ESSEC and CNRS.
    • Handle: RePEc:ema:worpap:2000-45
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    File URL: http://www.u-cergy.fr/IMG/documents//2000-45Martel.pdf
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    Cited by:

    1. Barthlmy, Fabrice & Fisher, Timothy C.G. & Martel, Jocelyn, 2009. "What discount rate should bankruptcy judges use? Estimates from Canadian reorganization data," International Review of Law and Economics, Elsevier, vol. 29(1), pages 67-72, March.
    2. Fisher, Timothy C.G. & Martel, Jocelyn & Gavious, Ilanit, 2016. "Tax claims, government priority, absolute priority and the resolution of financial distress," International Review of Law and Economics, Elsevier, vol. 48(C), pages 50-58.
    3. Beti Zafirova & Sonja Topuzovska & Julija Zhivadinovik & Marija Andonova, 2017. "Public Health Aspects of Post-Traumatic Stress Disorder in Patients Who Have Experienced a Car Accident," European Journal of Interdisciplinary Studies Articles, Revistia Research and Publishing, vol. 3, ejis_v3_i.
    4. Antill, Samuel, 2022. "Do the right firms survive bankruptcy?," Journal of Financial Economics, Elsevier, vol. 144(2), pages 523-546.
    5. Graeme Dean & Ed Altman, 2007. "Forum Editorial," Abacus, Accounting Foundation, University of Sydney, vol. 43(3), pages 1-1, September.
    6. Blazy, Régis & Esquerré, Stéphane, 2021. "The CV effect: To what extent does the chance to reorganize depend on a bankruptcy judge’s profile?," International Review of Law and Economics, Elsevier, vol. 66(C).
    7. Gilles Recasens, 2003. "Faut-il adopter un système pro-créanciers de défaillances? Une revue de la littérature," Revue Finance Contrôle Stratégie, revues.org, vol. 6(1), pages 119-153, March.
    8. Erkki Laitinen, 2011. "Assessing viability of Finnish reorganization and bankruptcy firms," European Journal of Law and Economics, Springer, vol. 31(2), pages 167-198, April.
    9. Timothy C. G. Fisher, 2007. "Discussion of Wong et al," Abacus, Accounting Foundation, University of Sydney, vol. 43(3), pages 388-395, September.
    10. Bart Leyman, 2012. "The uneasy case for rehabilitating small firms under the 1997-reorganization law in Belgium: evidence from reorganization plans," European Journal of Law and Economics, Springer, vol. 34(3), pages 533-560, December.
    11. B. Leyman & K. Schoors & P. Coussement, 2008. "The Role of Firm Viability, Creditor Behavior and Judicial Discretion in the Failure of Distressed Firms under Courtsupervised Restructuring: Evidence from Belgium," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/509, Ghent University, Faculty of Economics and Business Administration.
    12. Régis Blazy & Bertrand Chopard, 2012. "(Un)secured debt and the likelihood of court-supervised reorganization," European Journal of Law and Economics, Springer, vol. 34(1), pages 45-61, August.
    13. Stef, Nicolae & Bissieux, Jean-Joachim, 2022. "Resolution of corporate insolvency during COVID-19 pandemic. Evidence from France," International Review of Law and Economics, Elsevier, vol. 70(C).
    14. B. Leyman & K. Schoors & P. Coussement, 2008. "Court-supervised Restructuring: Pre-bankruptcy Dynamics, Debt Structure and Debt Rescheduling," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/507, Ghent University, Faculty of Economics and Business Administration.

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