7Bankruptcy and bankruptcy reorganizations have been identiJied as remedies for financial distress, but there is little agreement on their value to firms, managers, and the general economy. This paper provides a brief review of proposed bankruptcy strategies and some alternative views about their costs and benefits followed by an empirical study of the outcomes of 73 bankruptcies and subsequent reorganization efforts. The evidence suggests that there are few successful reorganizations, bankruptcy is a costly response to financial distress, and managerial choice in bankrupt firms is highly constrained by forces external to the firm. The diversity of stakeholder interests limits the value of global judgements about success or failure of bankruptcy strategies. Firm size dominates all other factors in predicting success in completing the reorganization process. Delayed filings primarily reflect failed efforts to avoid bankruptcy, not deliberate strategies. Reasons for the use of bankruptcy in spite of its high costs are discussed.Over the past decade, since the implementation of the Bankruptcy Reform Act of 1978, there has been a growing perception that deliberate bankruptcy can be used by managers as an effective strategy for dealing with financial distress. In a recent article in this Journal by Flynn and Farid (1991: 73) state 'Chapter XI (sic) can be used as a strategic alternative to realign the organization with its strategic competencies with a higher probability of reemerging from bankruptcy as a revitalized organization.' We believe that this view is Key words: Bankruptcy, business failure, financial distress, reorganization oversimplistic and overoptimistic. In this paper we will present evidence that bankruptcy reorganizations are not a simple matter, and that the probability of successful outcomes is low. A critical difference between Flynn and Farid's view and ours revolves around the issue of managerial control. The complexity of the bank-' The article by Flynn and Farid (1991) also suffers from their use of titles and provisions of the old Bankruptcy Act, which was replaced by a new Bankruptcy Code under the Bankruptcy Reform Act of 1978. A standard source for legal information on the Bankruptcy Code and Rules is the Collier Bankruptcy Manual (King, 1981). A good source for financial and accounting information is Bankruptcy and Insolvency Accounting, 3rd ed. (Newton, 1985 and Supplements).
yielded 1.40 g. (95%) of solid anít-7-norbornenol (IX), m.p. after vapor phase chromatographic purification, 117-118"; reported*• m.p. is 117-118". This material was hydrogenated to 7-norbomeol, identical with the 7-norbomeol obtained from VII and VIII above.Pyrolysis of the acetate (VII). Pyrolysis of the acetate (VII) was effected by injecting a sample into the sample inlet of a Beckman GC-2 heated at 225" with a column temperature of 130". No benzene could be detected among the many volatile products. The chief product, as shown by vapor phase chromatography, infrared and ultraviolet comparison with an authentic sample, was benzyl acetate.The acetate (VII) could also be pyrolyzed at 375°in a 9 in. column packed with glass helices to give good yields of benzyl acetate. With this apparatus the acetate (VII)was not pyrolyzed at 275®. Pyrolysis at a lower temperature in the gas chromatograph was probably promoted by carbonized materials known to be present in the inlet tube. Hydrolysis of 7-norbomadienyl acetate (VII). Hydrolysis of the acetate (VII) was attempted under the following conditions with uniformly negative results. In every instance the acetate was hydrolyzed but did not give the alcohol (VIII) . In most cases infrared analysis indicated ring opening.(1) IN hydrochloric acid/50% aqueous methanol at room temperature for 3 hr.(2) 2N hydrochloric acid/HiO at room temperature overnight.(3) IN potassium hydroxide/75% aqueous methanol overnight at room temperature under nitrogen.(4) IN sodium methoxide/methanol at room temperature for 2 hr. under nitrogen.Acid hydrolysis of the ether (VI) A solution of 0.5 g. (0.003 mole) of ether (VI) in 1 ml. of 50% sulfuric acid (0.018 mole) was allowed to stand at room temperature for 1 hr. Ice and water were added and the product was extracted with dichloromethane. None of the alcohol (VIII) could be detected in the product which appeared to consist chiefly of a saturated diol.
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