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Postbankruptcy Performance and Management Turnover
Author(s) -
HOTCHKISS EDITH SHWALB
Publication year - 1995
Publication title -
the journal of finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 18.151
H-Index - 299
eISSN - 1540-6261
pISSN - 0022-1082
DOI - 10.1111/j.1540-6261.1995.tb05165.x
Subject(s) - restructuring , bankruptcy , debt restructuring , debt , business , sample (material) , process (computing) , accounting , monetary economics , industrial organization , finance , economics , political science , law , sovereign debt , computer science , chemistry , chromatography , sovereignty , politics , operating system
This article examines the performance of 197 public companies that emerged from Chapter 11. Over 40 percent of the sample firms continue to experience operating losses in the three years following bankruptcy; 32 percent reenter bankruptcy or privately restructure their debt. The continued involvement of prebankruptcy management in the restructuring process is strongly associated with poor post‐bankruptcy performance. The substantial number of firms emerging from Chapter 11 that are not viable or need further restructuring provides little evidence that the process effectively rehabilitates distressed firms and is consistent with the view that there are economically important biases toward continuation of unprofitable firms.