We document insider opportunism in an insolvency regime that is characterized by weak creditor rights and uses an accounting rule to determine bankruptcy eligibility. Using a unique dataset of bankrupt firms from India, we show insiders manage earnings downward before filing for bankruptcy via inventory and trade receivable accruals. A battery of robustness tests confirm accrual behavior is not...

There are a large number of contributions to the bankruptcy problem (cf. the references in Curiel et al. (1987) and Thomson (2002)). This paper examines this problem from the game-theoretic viewpoint in the context of coalitional game. Suppose that a person dies with property left and the property is valued $P. Furthermore, he (or she) owes to n persons with the total debt, valued $D. When P<D,...

This paper considers the significance of credit markets and bankruptcy for life course mobility. Comparing parallel data from the 2007 Survey of Consumer Finances (SCF) and the 2007 Consumer Bankruptcy Project (CBP), we analyze use of the bankruptcy process as a function of the distribution of unplanned events, the ability of households to use credit markets to limit the adverse effects of such...

Actuality of research of the methods of bankruptcy prognostication of the enterprise is based on the following – in Latvia until now there is not the method of calculation of coefficients debugged and adapted to the Latvian terms for prognostication of bankruptcy. The estimation of probability of bankruptcy is made on the basis of the real standards, which exist in the world practice, but does ...

In this paper we model the spillovers from the restructuring of a financially distressed firm on other firms and the feedback effects from the restructuring. Our results indicate that the spillover and feedback effects are complex and are determined by several factors including the level of information asymmetry regarding the restructuring firm, its direct bankruptcy cost, bankruptcy’s effect o...

Many static neural networks have been studied extensively in financial classification problems. However, dynamic time series predictive classification using neural networks with memory, such as the Gamma Memory neural network (GMNN), may prove more accurate. In this study we compare the predictive accuracy of the GMNN to the Multilayer Perceptron neural network and the statistical approaches of...

In a tree enterprise, users reside at the nodes of the tree and their aim is to connect themselves, directly or indirectly, to the root of the tree. The construction costs of arcs of the tree are given by means of the arc-cost-function associated with the tree. Further the bankruptcy venture is described in terms of the estate of the bankrupt firm and the claims of the various creditors. The fi...

Thousands of U.S. households filed for bankruptcy just before the bankruptcy law changed in 2005. That rush-to-file was more pronounced, we find, in states with more generous bankruptcy exemptions and lower credit scores. We take that finding as evidence that the new law effectively reduces exemptions, which in turn should reduce the “demand” for bankruptcy and the resulting losses to suppliers...

We have conducted an agent-based simulation of chain bankruptcy. The propagation of credit risk on a network, i.e., chain bankruptcy, is the key to understanding largesized bankruptcies. In our model, decrease of revenue by the loss of accounts payable is modeled by an interaction term, and bankruptcy is defined as a capital deficit. Model parameters were estimated using financial data for 1,07...