Journal article
Financial Restructuring in Fresh-Start Chapter 11 Reorganizations
Financial management, Vol.38(4), pp.727-745
12/01/2009
DOI: 10.1111/j.1755-053X.2009.01054.x
Abstract
We find that firms substantially reduce their debt burden in "fresh-start" Chapter 11 reorganizations, yet they emerge with higher debt ratios than what is typical in their respective industries. While cross-sectional regressions reveal that post-reorganization debt ratios are more in line with the predictions of the static trade-off theory, they also reveal that pre-reorganization debt ratios affect post-reorganization debt ratios. Collectively, these results suggest that impediments in Chapter 11 prevent firms from completely resetting their capital structures. We also find that firms that reported positive operating income leading up to Chapter 11 emerge faster, suggesting that it is quicker to remedy strictly financial distress than economic distress.
Details
- Title: Subtitle
- Financial Restructuring in Fresh-Start Chapter 11 Reorganizations
- Creators
- Randall A. Heron - Indiana University – Purdue University IndianapolisErik Lie - University of IowaKimberly J. Rodgers - American University
- Resource Type
- Journal article
- Publication Details
- Financial management, Vol.38(4), pp.727-745
- Publisher
- FINANCIAL MANAGEMENT ASSOC
- DOI
- 10.1111/j.1755-053X.2009.01054.x
- ISSN
- 0046-3892
- eISSN
- 1755-053X
- Number of pages
- 19
- Language
- English
- Date published
- 12/01/2009
- Academic Unit
- Finance
- Record Identifier
- 9984380490602771
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