Abstract
Purpose – This paper presents both a theoretical and empirical review of the bankruptcy and reorganization literature. We point out the main articles developed in the field and present a group of studies carried out after the approval of the new bankruptcy law in Brazil. Design/methodology/approach – This paper provides a survey of the literature on bankruptcy and corporate reorganization. We investigate classic and recent papers in the field and present the results of some Brazilian studies that consider the announcement of the Brazilian bankruptcy law in 2005. Findings – We show that information asymmetry, coordination problems, and heterogeneity between creditors are pivotal to the resolution of financial distress. Moreover, the choice of restructuring is made according to the least-cost alternative. We discuss the practical implications of the literature by analyzing three cases of reorganization in Brazil and reveal that the complexity of each case can drive the decision to approve or reject the reorganization plan. Originality/value – We investigate the evolution of the bankruptcy and reorganization literature and provide a survey that explores both the international and Brazilian literature.
Highlights
This paper provides both a theoretical and empirical review of bankruptcy and reorganization studies
We investigate the evolution of the bankruptcy and reorganization literature and provide a survey that explores both the international and Brazilian literature
We elaborate a general review of reorganization and bankruptcy studies, shedding light on the different issues related to the topic
Summary
This paper provides both a theoretical and empirical review of bankruptcy and reorganization studies. We include recent papers and show more results from Brazilian studies This type of survey provides a broad analysis of the literature related to a specific topic. In addition to the theoretical and empirical results presented by Senbet and Wang (2010), our paper contributes to the literature by considering recent papers in the field and by addressing research conducted in Brazil right after the announcement of the new Brazilian bankruptcy law. We provide a review of the empirical studies focusing on the resolution of financial distress. We highlight studies conducted in Brazil after the new Brazilian bankruptcy law. The second section presents a theoretical review on reorganization and bankruptcy and highlights important empirical studies developed in the area.
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