Asset Allocation in Bankruptcy
February 2016
Working Paper Number:
CES-16-13
Abstract
This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy, employment and wages paid at real estate assets over time. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that even after accounting for reallocation, 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, in areas with low access to finance, and in areas with low economic growth. The results highlight that different bankruptcy approaches affect asset allocation and utilization particularly when search frictions and financial frictions are present.
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:
investment,
market,
organizational,
financial,
finance,
accounting,
lending,
loan,
bank,
bankruptcy,
revenue,
liquidation,
bankrupt,
debtor,
asset,
filing,
creditor
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National Bureau of Economic Research,
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Department of Economics,
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Washington University,
North American Industry Classification System,
Net Present Value,
Census Bureau Business Register,
Ohio State University,
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