Is Bargaining in Chapter 11 Costly?

In this paper I compare the bankruptcy bargaining process amongst different creditors and equity-holders, for firms with only one plan of reorganisation with those with multiple plans of reorganisation. I find that the class of unsecured creditors is the driving force in this renegotiation. The results suggest that unsecured creditors only accept plans of reorganisation where they benefit from deviations from absolute priority, though at the risk of lower recovery rates as a result of the extended bargaining. Equity-holders recover more in multiple-plan firms and unsecured creditors recover less. Multiple-plan firms have more classes of claimants than single-plan firms, which is consistent with more information asymmetry in the former cases and so a more intense bargaining