An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Barry Adler
New York University

Vedran Capkun
HEC - University Of Lausanne

Lawrence A Weiss
HEC - University of Lausanne

Abstract: The bankruptcy act of 1978 placed corporate managers (as debtor in possession) in control of the bankruptcy process. Between 2000 and 2001 managers lost such control to creditors. This study examines financial ratios of firms filing for bankruptcy between 1993 and 2004 and tests the hypothesis that the change from manager to creditor control created or exacerbated managerial (and dominant creditor) incentive to delay bankruptcy filing. We find a clear deterioration in the financial conditions of firms filing after 2001, which suggests that managers may now postpone filings to avoid creditor control. We also observe patterns of operating losses and liquidations that suggest adverse economic consequences from such delay.

Back to Session Listing

AAA Home Page