With high-profile company bankruptcies becoming distressingly common, many would be hard-pressed to find an upside. According to a new study by three finance researchers at the University of Utah's David Eccles School of Business, however, there might be a silver lining of sorts: the effectiveness of the US bankruptcy system. They found that 80% of fundamentally sound companies -- those with good business models but too much debt -- reorganized and emerged from Chapter 11 with only 7% fewer assets. Financially distressed firms tended to have bad debt ratios but good operating performance.
U.S. Bankruptcy Process Works, Weeds Out Weak, Finds University of Utah Study... Anonymous The Secured Lender; Mar 2009; 65, 2; Docstoc pg. 13 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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