Abstract
While the bankruptcy framework introduced in the seminal work of Bulow and Shoven and extended by White has been the foundation for theoretical work in the area for the last 20 years, it has never been empirically tested. The aim of the paper is to examine empirically the Bulow-Shoven-White framework using micro data on 810 bankrupt firms in Canada. Results are generally supportive of the Bulow-Shoven-White framework: the probability of reorganization increases with the level of free assets and the amount of debt reduction while it decreases with the level of unsecured debt. Results also show that the Bulow-Shoven-White framework does not provide a complete picture of the firm's bankruptcy decision. In particular, the relative size of government claims, the legal form of the firm, and the asset/debt ratio are also significant determinants of the bankruptcy decision.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
