Thursday, February 19, 2015

Bankrupt Family Firms

MASSA Massimo, ZALDOKAS Alminas
Read the working paper
INSEAD Working Paper 2015/16/FIN

We study the role of family ownership during the bankruptcy process. We argue that at times of distress family blockholders are better positioned to manage the firm and this is appreciated by minority shareholders and lenders alike. We test this hypothesis focusing on the sample of public US corporations between 2001 and 2008. First, we show that family firms are less engaged in forum shopping, emerge from bankruptcy faster and have higher recovery rates on debt. We further show that this translates into smaller drops in stock prices around bankruptcy filings, and has implications for ex-ante borrowing yields.