This paper finds evidence that regulatory forbearance toward weakly capitalized banks, which creates “zombie” banks, leads to the creation of “zombie” firms in the Japanese banking crisis of 1997-2003. Capital weak banks bankrupt large borrowers at higher levels of indebtedness than...

Among the collective wisdom about large corporate bankruptcy cases, the following points are almost undisputed: Longer chapter 11 cases cost more; Prepackaged chapter 11 cases cost less; Cases filed in New York or Delaware cost more; Fee examiners control the costs of big chapter 11 cases. But...

We analyse the strategies undertaken by financially-distressed companies and test the hypothesis that the probability of corporate recovery is positively related to the adoption of cash based strategies. We show that, companies that recover from financial distress are focused, diligent and adopt...

This article examines the tension in Australia between the insolvent trading prohibition and the voluntary administration regime provided for in the Corporations Act. The tension exists since the former seeks to prosecute directors for incurring debts that the company cannot pay whereas the...

While credit risk transfer market dramatically increases the complexity of lender's incentive structure and above all reduces the incentives of the bank to monitor debtor, a ‘harsh' bankruptcy environment (as evidenced in the shift from the debtor controlled to creditor controlled...