The Economic Impact of Chapter 11 Bankruptcy versus Out‐of‐Court Restructuring

Companies in financial distress have usually been able to choose between working out an agreement with their creditors (“private restructuring”) or entering into more expensive and lengthier formal Chapter 11 bankruptcy proceedings. But 2015 rulings in two cases by the U.S. District Court for the Southern District of New York may force distressed firms to enter Chapter 11 rather than seek negotiated out‐of‐court settlements. Using a large sample of U.S. companies that experienced financial difficulty during the period 2006–2014, the authors found that the companies that filed for bankruptcy and went through Chapter 11 proceedings experienced significantly more job losses and reductions of economic output than companies achieving out‐of‐court restructurings, both overall and on a per‐case basis. The authors' estimates of the overall losses in output associated with Chapter 11 bankruptcy cases ranged as high as 2.3% of 2014 GDP, as compared to at most 0.3% of GDP in the case of out‐of‐court negotiations. At the same time, the authors estimate that as many as 2.2 million job losses were attributable to cases involving bankruptcies while the out‐of‐court cases were associated with the loss of at most about 300,000 jobs. But, as the authors concede, these findings are exaggerated by a clear self‐selection bias—one that stems from the well‐documented tendency of more fundamentally profitable, and hence more solvent, companies to choose private restructuring over bankruptcy. Despite this limitation, the study provides a useful point of departure for future studies that aim to quantify the costs to the U.S. economy of limiting or removing the option of companies with valuable operations but the “wrong” capital structures to work out their financial difficulties outside of the bankruptcy court.     

论破产清算企业的内部控制

企业内部控制无处不在,无论持续经营企业还是破产清算企业都是如此。本文以我国企业破产清算过程中暴露出的内控问题为背景,以新破产法和企业内部控制基本规范为依托,探讨了构建破产清算企业内部控制制度的必要性,总结了我国企业破产清算中所出现的问题,提出了基于广义和狭义角度的我国破产清算企业内控架构,分析了破产清算企业内部控制的主要难点及其对策。     

Optimal Debt and Equity Values in the Presence of Chapter 7 and Chapter 11

Explicit presence of reorganization in addition to liquidation leads to conflicts of interest between borrowers and lenders. In the first–best outcome, reorganization adds value to both parties via higher debt capacity, lower credit spreads, and improved overall firm value. If control of the ex ante reorganization timing and the ex post decision to liquidate is given to borrowers, most of the benefits are appropriated by borrowers ex post. Lenders can restore the first–best outcome by seizing this control or by the ex post transfer of control rights. Reorganization is more likely and liquidation is less likely relative to the benchmark case with liquidation only.     

The Impact of Receiving Debtor-in-Possession Financing on the Probability of Successful Emergence and Time Spent Under Chapter 11 Bankruptcy

The ability to obtain financing is a critical element in attempting to successfully reorganise a firm which has declared Chapter 11 bankruptcy. Debtor-in-possession (DIP) financing has become an increasingly popular method in recent years. This paper examines whether receiving DIP financing is related to successful reorganisations and a shortened duration under Chapter 11 bankruptcy proceedings. This study finds that there is an increase in realised returns to equity at the announcement of DIP loan agreements which is positive and statistically significant. It is also found that DIP-financed firms have a reduced probability of liquidation, and shorter time spent under bankruptcy proceedings.     

Direct Bankruptcy Costs: Evidence from the Trucking Industry

Direct costs of bankruptcy are measured for a sample of firms in the trucking industry that petitioned for bankruptcy protection from 1970 to 1985. Average direct bankruptcy costs represent 9.12 percent of the book value of total assets as of the year before filing. These costs are large compared with those reported in prior studies: 3.39 percent of book value of assets for retail firms, 4.31 percent for industrials, and .53 percent for railroads. We also find evidence of substantial economies of scale in bankruptcy costs in the trucking sample.     

Reporting Discretion and the Choice of Fresh Start Values in Companies Emerging from Chapter 11 Bankruptcy

Using a sample of seventy-two firms that adopted fresh start reporting upon their emergence from Chapter 11 bankruptcy, I test whether management estimates of fresh start equity values are misstated and whether such misstatements are related to characteristics of individual firms' bankruptcy process. I predict that the reported fresh start value reflects a tension between managerial incentives to promote the acceptance of the plan of reorganization, and incentives to enhance future reported performance. I test whether the tendency to overstate the fresh start equity value is increasing in factors affecting the acceptance of the reorganization plan (i.e., bankruptcy claimants' relative bargaining power) and decreasing in factors affecting postbankruptcy reported performance (i.e., the probability of future losses). I find that, relative to the market value of equity immediately after emergence from Chapter 11, the fresh start equity value is, on average, understated by about 4%. The difference between the fresh start equity value and market value also exhibits significant cross-sectional variation (an average absolute error of 11%). Consistent with my first prediction, the misstatement is increasing in the relative bargaining power of junior claimants. In contrast to my second prediction, the misstatement is also increasing in the likelihood of future reported losses. This result suggests that firms that are more likely to experience postbankruptcy financial distress are more concerned with obtaining acceptance for their plan than with the effects of the fresh start equity value on postbankruptcy performance. Finally, I document that the misstatement in the fresh start equity value is negatively related to whether firms have undergone prepackaged bankruptcies, and positively related to replacement of a prebankruptcy CEO.     

Ex Ante Costs of Violating Absolute Priority in Bankruptcy

A basic question for the design of bankruptcy law concerns whether value should be divided in accordance with absolute priority. Research done in the past decade has suggested that deviations from absolute priority have beneficial ex ante effects. In contrast, this paper shows that ex post deviations from absolute priority also have negative effects on ex ante decisions taken by shareholders. Such deviations aggravate the moral hazard problem with respect to project choice—increasing the equityholders' incentive to favor risky projects—as well as with respect to borrowing and dividend decisions.     

金融资产管理公司参与问题企业破产重整的介入模式研究

金融资产管理公司参与问题企业破产重整是业界和学术界的热点研究问题。本文从共同治理理论出发并结合实践,总结归纳出金融资产管理公司介入破产重整领域的五种模式。其中,传统模式包括收购归集不良债权介入模式、共益债务介入模式和破产投资介入模式;创新模式包括受托清偿介入模式和预重整阶段介入模式。金融资产管理公司在运用不同介入模式过程中,应增强与地方政府及司法机关的沟通与合作,预判各类风险并夯实尽调工作;努力争取破产管理人身份,积极联合优质产业投资者作为重整投资人,盘活破产重整企业低效无效资产。     

Surviving Chapter 11 Bankruptcies: Duration and Payoff?

Three of the authors previously developed a model to predict the duration of Chapter 11 bankruptcy and the payoff to shareholders ( Partington et al ., 2001 ). This work augments that study using a much larger sample to re-estimate the model and assess its stability. It also provides an opportunity for out-of-sample testing of predictive accuracy. The resulting models are based on Cox's proportional hazards model and the current article points to the need to test two important assumptions underlying the model. First, that the hazards are proportional and, second, that censoring is independent of the event studied. Using the extended data set, all the previously significant accounting variables drop out of the model and only two covariates of the original model remain significant. These are the market wide credit spread and the market capitalization of the firm, both measured immediately prior to the firm's entry to Chapter 11. Receiver operating characteristic curves are then used to assess the predictive accuracy of the original and extended models. The results show that Lachenbruch tests can provide a misleading indication of predictive ability out of sample. Using the Lachenbruch method of in-sample testing, both models show predictive power, but in a true out-of-sample test they fail dismally. The lessons of this work are relevant to better predicting the gains and losses likely to accrue to shareholders of companies in Chapter 11 bankruptcy and in similar administrative arrangements in other jurisdictions.     

从银行债权保护看我国破产重整批准制度

2006年8月27日, (<中华人民共和国企业破产法))的颁布,标志着我国破产程序从清算主导型向再生主导型的转变.而随着破产重整这一新制度的引入,包括银行在内的破产债权人的保护问题也被寄予了更高的期望.然而,从我国企业破产法生效至今近两年的司法实践来看,重整制度不仅没有达到其加强对债权人利益保护的立法本意要求,反而有被债务人利用成为其合法逃债依据的趋势.     

Investing in Chapter 11 stocks: Trading,value, and performance

We address questions about Chapter 11 stocks regarding their trading environment, fundamental value, and performance. First, there exists active trading for Chapter 11 stocks throughout the bankruptcy process. Second, equity value after filing is positively related to asset value, asset volatility, risk-free rate, and expected duration and is negatively related to liabilities. Furthermore, the return correlation between bankrupt stocks and their matching samples exhibits non-linearity similar to out-of-money call options. Third, investing in Chapter 11 stocks incurs large losses. Consistent with heterogeneous beliefs and limits to arbitrage, stocks with higher levels of information uncertainty and more binding short-sale constraints experience more negative returns.     

The Relationship between Bankruptcy Model Predictions and Stock Market Perceptions of Bankruptcy

This study uses a cumulative sum technique to determine the point at which the stock market first perceives that a firm may file for bankruptcy. The study then attempts to identify information, whether from financial statements or from other sources, that may have influenced the market in its reassessment of the firm's prospects. The results indicate that the switching point of the mean and variance of stock returns appears to be related both to financial statement information (as measured by changes in bankruptcy model probability assessments) and the release of unfavorable news in the Wall Street Journal.     

破产企业治理结构与破产会计信息质量监控

本文以新破产法 (草案) 的基本框架为依托, 将破产企业分为破产和解企业、破产重整企业和破产清算企业三类, 探讨了不同类型破产企业的治理结构及其会计信息的特点, 提出了明确破产会计信息质量的监控目标、建立全面的破产会计制度规范、构建完整的破产会计信息质量监控体系、提高破产相关人员的综合素质等监控破产会计信息质量的基本思路。     

Bad news does not always travel fast: evidence from Chapter 11 bankruptcy filings

This paper examines the stock price performances of 275 non‐financial, non‐utility U.S. industrial firms that continue trading on the main exchanges after filing for Chapter 11 bankruptcy between 1 October 1979 and 17 October 2005. This paper identifies a negative and statistically significant post‐bankruptcy drift that lasts for at least 6 months. This finding adds to the literature showing that the market is unable to process bad public news events in a timely manner. Further analysis suggests that the theoretical model proposed by Hong and Stein (1999) can be used to help explain this market‐pricing anomaly.     

Debtor-in-possession financing and the resolution of uncertainty in Chapter 11 reorganizations

This paper investigates the use of debtor-in-possession (DIP) financing by firms reorganizing under Chapter 11. A model is developed in which there is asymmetric information between the creditors of a distressed firm and its management. In this context, it is demonstrated that reliance on DIP financing resolves informational asymmetries regarding the true economic value of distressed firms. The model's conclusions are empirically supported in the paper and by results of extant research. The signaling role of DIP financing is evidenced both by the positive stock price reaction to DIP announcements and the fact that firms employing DIP financing have more successful reorganizations.     

Resolution of financial distress: A theory of the choice between Chapter 11 and workouts

We model the reorganization decision of distressed firms. One of the novel features of our paper is that we examine the asset and liability side restructuring decisions jointly to resolve financial distress. Secondly, we model several institutional features of coping with financial distress such as debtor-in-possession financing, prepackaged bankruptcies, and asset sales. In our model, asset liquidity, indirect costs of financial distress, and the option value of equity are the determinants of the choice between Chapter 11 reorganizations and workouts. The model develops several testable predictions, some of which are novel and others of which are able to explain previously documented empirical results.     

中国第一破产案始末及警示

1999年1月11日,在中国的金融界和法律界发生了一件绝对是令人震撼的事,一度稳坐信托界"头把"交椅的广东国际信托投资公司申请破产,国内外一片哗然。广国投申请破产之所以引起如此大的反响:一是它是中国第一家申请破产的金融机构;二是广国投具有巨额境外债务,如何保证中国金融市场的稳定和公平、合理解决债务成为中国金融决策界、司法界、金融业界以及债权人极其关切的问题。无论国外还是国内都把广国投破产看作是中国金融机构退市的晴雨表和试金石。     

论我国破产管理人制度的法律构建

我国的现行破产法律制度中,破产管理人的部分职责主要由破产清算组来承担,这种设置在立法技术上和实务上都是不科学的.虽然新《破产法》草案创建了包括破产管理人的资质、地位、职责、选任及报酬、责任承担等内容在内的专业化、市场化的破产管理人制度,但如何建立成熟完善的管理人制度,仍有待于在理论上和实践上进一步探索.