Chapter 7 and Chapter 11 Bankruptcy Factors

• In Event: Debt and Bankruptcy
  In Paper Session: Topics in Debt and Bankruptcy

Abstract

Identifying factors reflective of corporate success or failure has been the subject of much research and discussion for decades. The topic has taken on a renewed emphasis with FASB’s August 2014 pronouncement requiring corporate management to also address corporate continuity starting with reporting periods ending after December 15, 2016. This work looks at one aspect of bankruptcy by examining the distinction between financial factors associated with Chapter 7 and Chapter 11 corporate filings. This study is the first to examine factors explanatory of bankruptcy (Chapter 7 or 11) type. Chapter 7 and Chapter 11 bankruptcy filings are both indicators that the firm has serious financial trouble. There is a distinct financial contrast between the viable firms and firms filing for bankruptcy (based on prior studies). The financial contrast between firms filing for Chapter 7 versus Chapter 11 bankruptcy is not as distinct. Still, there are significant financial differences between the two sets of bankruptcy firms. This study identified and discussed some of those financial differences.

Author

• Douglas Kevin Barney, Indiana University - Southeast