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Journal Articles Journal of Law, Economics, and Organization Year : 2013

Value Destruction in the New Era of Chapter 11

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Barry E. Adler
  • Function : Author
Lawrence A. Weiss
  • Function : Author

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.
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Dates and versions

hal-00674234 , version 1 (26-02-2012)

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Vedran Capkun, Barry E. Adler, Lawrence A. Weiss. Value Destruction in the New Era of Chapter 11. Journal of Law, Economics, and Organization, 2013, 29 (2), pp.461-483. ⟨10.1093/jleo/ewr004⟩. ⟨hal-00674234⟩

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