Reorganization of Bankrupt Firms in France Continuation Versus Sale

One particularity of the French bankruptcy law is that it provides bankrupt rms with two forms of reorganization. The Court may order either the continuation of the bankrupt firm in the same entity or the sale of the bankrupt firm to another entity as going-concern. The purpose of this paper consists in investigating the factors that would influence the reorganization outcome in France (continuation or sale). We use a random sample of 500 firms that led for reorganization in the commercial Court of Paris between 1995 and 2004 and that had their reorganization plans confirmed between May 1995 and September 2006. Logistic regression analysis shows that the probability of confirming a continuation plan increases with the profitability of the firm, the fraction of intangible assets and for firms having financing and/or business problems whereas the probability of confirming a sales plan increases with the size of thebankrupt firm, the secured debt to assets ratio and for debtors having personal problems