Analysis of Length of Time Spent in Chapter 11 Bankruptcy

by Jesus Orbe of the Universidad del Pais Vasco,
Eva Ferreira of the Universidad del Pais Vasco, and
Vicente Núñez-Antón of the Universidad del Pais Vasco

January 9, 2001

Abstract: This paper investigates original issuers of high yield bonds in Chapter 11 bankruptcy to determine which factors affect the length of time spent in Chapter 11. In order to do this analysis we propose a flexible new duration model, the censored partial regression model. This model allows us to consider the effect of some variable on the duration using a nonparametric functional form. We find that the choice of prepackaged Chapter 11, the length of time negotiating before filling for Chapter 11, the profitability, the highly leveraged transaction, the participation of different disputes, the role of vulture funds and some institutional changes turn out to be relevant to analyze this duration.

JEL Classification: C41, G33.

Keywords: Lifetime Data Models, Censorship, Kaplan-Meier, Bootstrap, Nonparametric Estimation.

Published in: "Length of Time Spent in Chapter 11 Bankruptcy: A Censored Partial Regression Model", Applied Economics, Vol. 34, No. 15, (October 2002), pp. 1949-1957.

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