Abstract
Prior research has shown that the accounting information available in the year just prior to filing bankruptcy is associated with the likelihood of filing for Chapter 11 protection. This information, however, is more predictive of bankruptcy for stressed firms than for non-stressed firms. We extend this line of research by showing that in addition to being associated with bankruptcy, the accounting information available in the year just prior to a firm filing for bankruptcy protection is also associated with whether or not a firm will emerge from Chapter 11 bankruptcy. We classify stress as either long-term stress (solvency risk) and short-term stress (liquidity risk) and predict that firms that exhibit low solvency risk and high liquidity risk are most likely to emerge from bankruptcy. Firms that exhibit high solvency risk and high liquidity risk are predicted to be least likely to emerge from bankruptcy. Cross-sectionally, our results generally support these predictions, but our findings differ across large and small firms.
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.
