The long-run performance of firms emerging from chapter 11 bankruptcy

Jory, S.R. and Madura, J. 2010. The long-run performance of firms emerging from chapter 11 bankruptcy. Applied Financial Economics. 20 (14), pp. 1145-1161.

TitleThe long-run performance of firms emerging from chapter 11 bankruptcy
AuthorsJory, S.R. and Madura, J.
Abstract

In this article, we assess the stock price performance of 184 firms emerging from Chapter 11 bankruptcy between 1980 and 2006. We find their mean post-bankruptcy performance to be similar to the performance of their size and-book-to-market control firms, as well as to the performance of their respective New York Stock Exchange-American Stock Exchange (NYSE-AMEX) beta decile-portfolio. We also analyse the effects of the bankruptcy process, new equity ownership and Chief Executive Officer (CEO) changes on the stock price performance of firms that emerged from Chapter 11. We find that being incorporated in the state of Delaware, the bankruptcy duration, a prepackaged bankruptcy, and the proportion of equity retained by the pre-Chapter 11 shareholders positively influence stock price performance. We also find that filing Chapter 11 with the Delaware Bankruptcy District Court, a change in the company's name, equity ownership by management, and the experience of the new CEO leading the firm out of bankruptcy do not lead to improved performance post-bankruptcy.

JournalApplied Financial Economics
Journal citation20 (14), pp. 1145-1161
ISSN0960-3107
YearJul 2010
PublisherTaylor & Francis
Digital Object Identifier (DOI)doi:10.1080/09603101003761895
Publication dates
PublishedJul 2010

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