摘要
Insolvent firms usually file for formal bankruptcy protection under either liquidation or reorganization.Reorganization aims to save viable failing firms whereas liquidation focuses on filtering out unviable failing firms.This paper theoretically and empirically investigates the determinants of formal bankruptcy resolution.We present a concise theory to reveal the theoretical boundary between liquidation and reorganization,which reflects how industry characteristics,judicial bias,and firm characteristics affect the outcome of bankruptcy resolution.By using the commercial bankruptcy data on US courts(2000–2016),we validate the proposed theory.In empirical tests,we deploy discrete-choice models to address the main predictions derived from theory and conduct robustness checks(e.g.placebo test).We document that firms are more likely to be reorganized when their industry is experiencing prosperity.Firms in asset-heavy industries(e.g.hotels,mining,and oil)tend to be reorganized.Formal resolution of bankruptcy cases handled by courts in Alaska and Hawaii are more likely to be reorganization than is the case in other states;however,firms that file bankruptcy petitions in California courts are more likely to face liquidation.Finally,larger and more transparent firms are more likely to be reorganized.
