Corporate restructuring: empirical evidence on the approval of the reorganization plan

Stock price reaction to an arrangement approval in restructuring proceedings – the case of Poland

“…In addition, in many legal orders, we have to deal with so-called privileged claims and claims secured by the debtor's assets, making it even more challenging to reach a compromise [McCormack, 2017]. In the literature, this problem is extensively presented within the framework of contract theory, which examines the conclusion of formal and informal contracts by parties representing diverse interests and with different levels of information [Jackson, 1982;Schwartz, 1998;von Thadden et al, 2010;Lipson, 2016;Adler and Triantis, 2017;Silva and Saito, 2018;Skeel, 2020;Warren et al, 2021]. Furthermore, the creditors' vote on the arrangement is preceded by many analyses and valuations included in the restructuring plan.…”

The Impact of Delay: Evidence from Formal Out-of-Court Restructuring

“…For debtors, in addition to account blockages, we match on variables including industry, age, location, Altman Z-Score (as measured in Altman, 1983;Altman et al, 2017), debt ratio, liquidity ratio, exporter status, public procurement contracts, as well as to preentrance outcome variables across three periods (see Chabé-Ferret, 2017). Additionally, because all the debtor-creditor pairs can be observed, debtors can also be matched on the characteristics of their creditors (see Silva and Saito, 2018), especially the vote share of creditor groups (i.e. financial institutions, state and state-owned firms, private suppliers or a mix), the concentration of debt, number of creditors, share of secured creditor claims, total claim size, and the regional Financial Agency (FINA) 8 that supervised the case.…”

“…In Sweden, management approval is required for restructuring, while the Danish Reform Act of 2010 enabled creditors to file for reorganization without management consent for approving restructuring (Agrawal et al, 2020). One of the rare studies that examined voting for restructuring (Silva and Saito, 2018) used a sample of 120 firms in Brazil between 2005 and 2014. Several factors were found to be positively associated with the acceptance of the restructuring plans, including distribution of collateral assets in debt repayment disposal and having a high share of unsecured creditors.…”

“…23 Firms are also divided into three financial distress categories-safe, grey and distressed. 24 (8) To account for the probability of bargaining success (Silva and Saito, 2018) we match on the size of debt and liquidity relative to assets, the lagged debt ratio (defined as the share of total debt divided by the book value of assets), and the liquidity ratio (defined as sum of cash in the bank and short-term assets divided by the book value of assets).…”

“…(13) Finally, to account for dynamic factors that can affect the probability of bargaining failure (Silva and Saito, 2018) and firm outcomes we match on aggregated data from debtor-creditor pairs. We include a set of dummy variables for whether a given class of creditors controls the majority of votes as well as if a mixed-class majority controls the majority vote (state majority is the omitted category).…”