Title

Do Self-Serving Managers Choose Chapter 11 Filing Over Out-of-Court Restructuring?

Document Type

Article

Publication Date

1-1-2006

Abstract

I investigate whether self-serving managers in financially distressed firms influence a firm's decision on the choice of debt restructuring method. 1 show that there is a non-linear relationship between managerial ownership and the probability of Chapter 11 filing. I find that distressed firms are more likely to choose Chapter 11 with the increase of managerial ownership when managerial ownership is in the 5% - 25% range. I also find a significant curvilinear relation between managerial ownership and the probability of Chapter 11. My results are consistent with the hypothesis that managerial ownership plays a significant role in corporate decisions.

DOI

10.1007/BF02834278

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