Asset Allocation in Bankruptcy

55 Pages Posted: 3 Apr 2017 Last revised: 7 Mar 2021

See all articles by Shai Bernstein

Shai Bernstein

Harvard Business School

Emanuele Colonnelli

University of Chicago - Booth School of Business

Benjamin Charles Iverson

Brigham Young University

Multiple version iconThere are 2 versions of this paper

Date Written: March 2017

Abstract

This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users, and in areas with low access to finance. The results highlight the importance of local search frictions and financial frictions in affecting the allocation of assets in bankruptcy.

Suggested Citation

Bernstein, Shai and Colonnelli, Emanuele and Iverson, Benjamin Charles, Asset Allocation in Bankruptcy (March 2017). NBER Working Paper No. w23305, Available at SSRN: https://ssrn.com/abstract=2945250

Shai Bernstein (Contact Author)

Harvard Business School ( email )

Boston, MA 02163
United States

Emanuele Colonnelli

University of Chicago - Booth School of Business ( email )

HOME PAGE: http://emanuelecolonnelli.com

Benjamin Charles Iverson

Brigham Young University ( email )

United States

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