Asset Allocation in Bankruptcy

SHAI BERNSTEIN; EMANUELE COLONNELLI; Benjamin Iverson

doi:10.1111/jofi.12740

journal article Nov 29, 2018

Asset Allocation in Bankruptcy

SHAI BERNSTEIN EMANUELE COLONNELLI Benjamin Iverson

The Journal of Finance Vol. 74 No. 1 pp. 5-53 · Wiley

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Abstract

ABSTRACTThis paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that the long‐run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users and in areas with low access to finance. These findings suggest that when search frictions are large, liquidation can lead to inefficient allocation of assets in bankruptcy.

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Details

Published: Nov 29, 2018
Vol/Issue: 74(1)
Pages: 5-53
License: View

Authors

Cite This Article

SHAI BERNSTEIN, EMANUELE COLONNELLI, Benjamin Iverson (2018). Asset Allocation in Bankruptcy. The Journal of Finance, 74(1), 5-53. https://doi.org/10.1111/jofi.12740

Asset Allocation in Bankruptcy

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