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Bailouts And Bankruptcies: Corporate Distress, Troubled Debt Restructurings And Equity Stripping

Author

Listed:
  • Saibal Ghosh

    (Centre for Advanced Financial Research and Learning (CAFRAL))

  • Ashiana Salian

    (Centre for Advanced Financial Research and Learning (CAFRAL))

Abstract

We investigate the debt restructuring process and outcomes for a sample of 483 firms that undergo corporate debt restructuring (CDR) between 2002 and 2013. 58 firms exit successfully, 71 are unsuccessful or withdrew and the rest await resolution. Firms that exit successfully are more profitable and less levered entering the CDR process and spend longer times in restructurings. Little net equity enters CDR firms, while there is some evidence of equity stripping, particularly in firms with greater promoter control. The lack of coordination between creditors and interestingly, across different bankruptcy forums, impedes restructuring. The changes in the types of firms entering the CDR process in recent years appears to indicate lower Kaplan-Meier survival rates, although the insufficient passage of time makes the conclusion tentative.

Suggested Citation

  • Saibal Ghosh & Ashiana Salian, 2018. "Bailouts And Bankruptcies: Corporate Distress, Troubled Debt Restructurings And Equity Stripping," Working Papers 022334, Centre for Advanced Financial Research and Learning (CAFRAL).
    • Handle: RePEc:ris:cafral:022334
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    File URL: https://www.cafral.org.in/sfControl/content/Speech/1182016105304AMCDR.pdf
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    More about this item

    Keywords

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    JEL classification:

    • G3 - Financial Economics - - Corporate Finance and Governance
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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