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The long-run performance of firms emerging from chapter 11 bankruptcy

Jory, Surendranath R. and Madura, Jeff (2010) The long-run performance of firms emerging from chapter 11 bankruptcy. Applied Financial Economics, 20 (14). pp. 1145-1161. ISSN 0960-3107

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Official URL: http://dx.doi.org/10.1080/09603101003761895

Abstract

In this article, we assess the stock price performance of 184 firms emerging from Chapter 11 bankruptcy between 1980 and 2006. We find their mean post-bankruptcy performance to be similar to the performance of their size and-book-to-market control firms, as well as to the performance of their respective New York Stock Exchange-American Stock Exchange (NYSE-AMEX) beta decile-portfolio. We also analyse the effects of the bankruptcy process, new equity ownership and Chief Executive Officer (CEO) changes on the stock price performance of firms that emerged from Chapter 11. We find that being incorporated in the state of Delaware, the bankruptcy duration, a prepackaged bankruptcy, and the proportion of equity retained by the pre-Chapter 11 shareholders positively influence stock price performance. We also find that filing Chapter 11 with the Delaware Bankruptcy District Court, a change in the company's name, equity ownership by management, and the experience of the new CEO leading the firm out of bankruptcy do not lead to improved performance post-bankruptcy.

Item Type:Article
Research Community:University of Westminster > Westminster Business School
ID Code:7788
Deposited On:22 Mar 2010 11:33
Last Modified:23 Jul 2010 16:03

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