Keywords
liquidation outcomes, asset allocation, search frictions
Abstract
This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users and in areas with low access to finance. These findings suggest that when search frictions are large, liquidation can lead to inefficient allocation of assets in bankruptcy.
Original Publication Citation
“Asset Allocation in Bankruptcy,” with Shai Bernstein and Emanuele Colonnelli, Journal of Finance 74, Issue 1 (February 2019): 5-53 (Lead Article).
BYU ScholarsArchive Citation
Bernstein, Shai; Colonnelli, Emanuele; and Iverson, Benjamin, "Asset Allocation in Bankruptcy" (2019). Faculty Publications. 8974.
https://scholarsarchive.byu.edu/facpub/8974
Document Type
Peer-Reviewed Article
Publication Date
2019
Publisher
Journal of Finance
Language
English
College
Marriott School of Business
Department
Finance
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