Is bankruptcy costly? Recent evidence on the magnitude and determinants of indirect bankruptcy costs
Is bankruptcy costly? Recent evidence on the magnitude and determinants of indirect bankruptcy costs
In this study we estimate indirect bankruptcy costs for a recent sample of large corporate bankruptcies in the United States over the period, 1997 to 2004. We find indirect bankruptcy costs of approximately 2%, 6.2% and 14.9% of firm value in years -3, -2 and -1 relative to the year of bankruptcy announcement respectively. Together with the direct costs reported in Altman (1984), our results suggest total bankruptcy related costs around 6.09%, 9.71% and 17.43% of firm value over the correspondin