Do Country Specific Bankruptcy Codes Determine Long‐term Financial Performance? The Case of Metallgesellschaft AG and Columbia Gas System |
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| Authors: | Narayanan Jayaraman Sanjiv Sabherwal & Milind Shrikhande |
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| Institution: | DuPree College of Management, Georgia Institute of Technology,;College of Business Administration, University of Rhode Island,;J. Mack Robinson College of Business, Georgia State University |
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| Abstract: | In this paper, we examine the impact of financial distress, the bankruptcy code, and related procedures on the long-term performance of two companies engaged in similar businesses across two countries. Both the companies were driven into bankruptcy as a result of unanticipated changes in energy prices. Though the resolution of bankruptcy of the US firm took a longer time, the post-reorganization performance of the firm has been excellent. In contrast, the post-reorganization performance of the German firm, which emerged out of bankruptcy in 2 weeks, has been poor. These results are consistent with the view that one of the important determinants of post-bankruptcy performance of a firm is more likely to be the underlying economic fundamentals rather than the country specific bankruptcy code through which the firm reorganizes. |
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