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A Re–examination of the Effectiveness of the Bankruptcy Process
Author(s) -
Platt Harlan D.,
Platt Marjorie B.
Publication year - 2002
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/1468-5957.00467
Subject(s) - bankruptcy , equity (law) , argument (complex analysis) , bankruptcy prediction , economics , actuarial science , process (computing) , business , financial economics , econometrics , finance , computer science , political science , medicine , law , operating system
As an increasing number of companies go bankrupt, society grows concerned with the process’s efficacy. In contrast to previous research, we find that relatively healthy companies emerge from bankruptcy as evidenced by their operating and equity performance post bankruptcy. While we find a substantial degree of variation in the forecast accuracy of sales, EBIT and net income, we find that forecast errors are not statistically significant and are smaller than had been thought. We provide evidence to support the argument that the economy’s health affects operating and equity outcomes post bankruptcy.