Journal of Financial Economics Vol. 27 No. 2 1990

Troubled debt restructurings

Stuart C. Gilson^1,2; Kose John^1,2; Larry H. P. Lang^1,2

¹ New York University · ² The University of Texas at Austin

Abstract

This study investigates the incentives of financially distressed firms to restructure their debt privately rather than through formal bankruptcy. In a sample of 169 financially distressed companies, about half successfully restructure their debt outside of Chapter 11. Firms more likely to restructure their debt privately have more intangible assets, owe more of their debt to banks, and owe fewer lenders. Analysis of stock returns suggests that the market is also able to discriminate ex ante between the two sets of firms, and that stockholders are systematically better off when debt is restructured privately.

DOI

10.1016/0304-405x(90)90059-9

Volume

27

Issue

2

Pages

315-353

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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