Survival time model of a coalition theory of financial distress.

摘要

This paper uses a survival time model to empirically test Bulow and Shoven's coalition theory of financial distress during the period leading to a possible Chapter 11 bankruptcy petition. A bank-equityholder coalition negotiates informally to maximize the value of the coalition's claims. If the bank expects to enhance its position by having equity transferred to it, it will allow the firm to continue; otherwise the bank will force the company into Chapter 11 bankruptcy.; The survival time model determines the effect of several covariates on the length of time until a firm files for Chapter 11. Empirical evidence provides support for the coalition theory. The results indicate that coalitions allow firms with relatively small amounts of debt, high net worth, large cash flows, large asset size, low volatility of operating earnings, and large investments in reputation and firm-specific capital to avoid Chapter 11 proceedings. The Bankruptcy Reform Act of 1978 significantly altered the firm characteristics that are important to coalitions forcing Chapter 11 bankruptcy. Size became more important while the relative amount of debt became less important. Since the passage of the new bankruptcy code, the likelihood of bankruptcy has increased over time.; The economic significance of the survival model is tested using a validation sample to predict which firms are likely to face Chapter 11 proceedings. The model is able to correctly predict the majority of Chapter 11 filings in the validation sample.