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Do Country Specific Bankruptcy Codes Determine Long‐term Financial Performance? The Case of Metallgesellschaft AG and Columbia Gas System
Author(s) -
Jayaraman Narayanan,
Sabherwal Sanjiv,
Shrikhande Milind
Publication year - 2001
Publication title -
journal of international financial management and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.818
H-Index - 37
eISSN - 1467-646X
pISSN - 0954-1314
DOI - 10.1111/1467-646x.00071
Subject(s) - bankruptcy , financial distress , business , term (time) , german , finance , accounting , economics , financial system , physics , archaeology , quantum mechanics , history
In this paper, we examine the impact of financial distress, the bankruptcy code, and related procedures on the long‐term performance of two companies engaged in similar businesses across two countries. Both the companies were driven into bankruptcy as a result of unanticipated changes in energy prices. Though the resolution of bankruptcy of the US firm took a longer time, the post‐reorganization performance of the firm has been excellent. In contrast, the post‐reorganization performance of the German firm, which emerged out of bankruptcy in 2 weeks, has been poor. These results are consistent with the view that one of the important determinants of post‐bankruptcy performance of a firm is more likely to be the underlying economic fundamentals rather than the country specific bankruptcy code through which the firm reorganizes.