Are firms on the right page with Chapter 11? An analysis of firm choices that contribute to post-bankruptcy survival

Historically, corporate bankruptcy reorganization has generated varying results with respect to subsequent firm performance. Some firms reorganize effectively and emerge as more efficient and productive enterprises. However, other inefficient companies strive to survive by utilizing the rehabilitative process of Chapter 11; though liquidation might be a more suitable course of action. This study investigates which characteristics of firm performance and Chapter 11 bankruptcy are linked to successful emergence upon reorganization. We find that the strongest contributor to post-bankruptcy survival is having new management in place. This suggests that Chapter 11 can be utilized as an effective rehabilitative tool in the ‘right hands’.