Keywords

chapter 11, ownership structure, distressed debt, trading in bankruptcy

Abstract

Using a novel data set that covers individual debt claims against 136 bankrupt US companies and includes information on a subset of claims transfers, we provide new empirical insight regarding how a firm’s debt ownership relates to bankruptcy outcomes. Firms with higher debt concentration at the start of the case are more likely to file prearranged bankruptcy plans, to move quickly through the restructuring process, and to emerge successfully as independent going concerns. Moreover, higher ownership concentration within a debt class is associated with higher recovery rates to that class. Trading of claims during bankruptcy concentrates ownership further, but this trading is not associated with subsequent improvements in bankruptcy outcomes and could, at the margin, increase the likelihood of liquidation.

Original Publication Citation

“The Ownership and Trading of Debt Claims in Chapter 11 Restructuring,” with Victoria Ivashina and David Smith, Journal of Financial Economics 119, Issue 2 (February 2016): 316-335.

Document Type

Peer-Reviewed Article

Publication Date

2016

Publisher

Journal of Financial Economics

Language

English

College

Marriott School of Business

Department

Finance

University Standing at Time of Publication

Associate Professor

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