This paper provides a synthetic and evaluative survey of issues in corporate financial distress and bankruptcy. This area has moved into a public domain as a result of the recent global financial crisis that witnessed failures of many venerable institutions that got rescued by the government....

We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm's leverage policy. We show that the two indexes have at most a...

This paper asks whether the stocks of bankrupt firms are correctly priced, and explores who trades the stocks of these firms, and why. We show that firms in Chapter 11 are heavily traded by retail investors who are also their main shareholders. We further demonstrate that the stocks of these...

We investigate the impact of bankruptcy codes on firms' capital-structure choices. We develop a theoretical model to identify how firm characteristics may interact with the bankruptcy code in determining optimal capital structures. A novel and sharp empirical implication emerges from this...

Firms that file for Chapter 11 are actively traded. This paper investigates who trades these bankrupt firms and why. We also examine the potential pricing impact of this active trading. We find that the unique lottery-like characteristics of bankrupt firms make them attractive to a particular...