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MANAGING DEFAULT: SOME EVIDENCE ON HOW FIRMS CHOOSE BETWEEN WORKOUTS AND CHAPTER 11

MANAGING DEFAULT: SOME EVIDENCE ON HOW FIRMS CHOOSE BETWEEN WORKOUTS AND CHAPTER 11 Footnotes 1 . Source: Turnarounds and Workouts , Washington, D.C. 2 . See Michael Jensen, “Active Investors, LBOs, and the Privatization of Bankruptcy,” Journal of Applied Corporate Finance (Spring, 1989). 3 . Stuart Gilson , Kose John , and Larry Lang , “ Troubled Debt Restructurings: An Empirical Study of Private Reorganization of Firms in Default ,” Journal of Financial Economics 26 ( 1990 ). We constructed our sample by first ranking all New York and American Stock Exchange‐listed companies by their common stock returns (measured over three consecutive years), and then identifying all firms in the bottom five percent of these returns that were either in default on their debt, bankrupt, or restructuring their debt to avoid bankruptcy, based on coverage of these firms in the Wall Street Journal. This selection process was repeated for various years, resulting in a sample of firms that first experienced financial difficulty throughout the period 1978–1987. 4 . A darkly humorous account of how the Bankruptcy Code sometimes creates perverse incentives for lawyers to prolong the firm's stay in Chapter 11 (for example, by filing excessive motions with the court) can be found in Sol Stein, A Feast for Lawyers (M. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Applied Corporate Finance Wiley

MANAGING DEFAULT: SOME EVIDENCE ON HOW FIRMS CHOOSE BETWEEN WORKOUTS AND CHAPTER 11

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References (4)

Publisher
Wiley
Copyright
Copyright © 1991 Wiley Subscription Services, Inc., A Wiley Company
ISSN
1078-1196
eISSN
1745-6622
DOI
10.1111/j.1745-6622.1991.tb00605.x
Publisher site
See Article on Publisher Site

Abstract

Footnotes 1 . Source: Turnarounds and Workouts , Washington, D.C. 2 . See Michael Jensen, “Active Investors, LBOs, and the Privatization of Bankruptcy,” Journal of Applied Corporate Finance (Spring, 1989). 3 . Stuart Gilson , Kose John , and Larry Lang , “ Troubled Debt Restructurings: An Empirical Study of Private Reorganization of Firms in Default ,” Journal of Financial Economics 26 ( 1990 ). We constructed our sample by first ranking all New York and American Stock Exchange‐listed companies by their common stock returns (measured over three consecutive years), and then identifying all firms in the bottom five percent of these returns that were either in default on their debt, bankrupt, or restructuring their debt to avoid bankruptcy, based on coverage of these firms in the Wall Street Journal. This selection process was repeated for various years, resulting in a sample of firms that first experienced financial difficulty throughout the period 1978–1987. 4 . A darkly humorous account of how the Bankruptcy Code sometimes creates perverse incentives for lawyers to prolong the firm's stay in Chapter 11 (for example, by filing excessive motions with the court) can be found in Sol Stein, A Feast for Lawyers (M.

Journal

Journal of Applied Corporate Finance – Wiley

Published: Jun 1, 1991

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