Tuesday, August 04, 2015

Bankrupt Family Firms by Massimo Massa, Alminas Zaldokas :: SSRN

For good or bad, family forms are often different.  In this article Massa and Zaldokas investigate these differences during a bankruptcy.

Bankrupt Family Firms by Massimo Massa, Alminas Zaldokas :: SSRN:

"Abstract:      We study the role of family ownership during the bankruptcy process. We argue that at times of distress family blockholders are better positioned to manage the firm and this is appreciated by minority shareholders and lenders alike. We test this hypothesis focusing on the sample of public US corporations between 2001 and 2008. First, we show that family firms are less engaged in forum shopping, emerge from bankruptcy faster and have higher recovery rates.

Two fast "look-ins":

"...anecdotal evidence suggests that different types of large shareholders view bankruptcy proceedings differently and this in turn may affect bankruptcy costs. While institutional investors and professional asset managers are motivated by a purely financial resolution, families may also have reputational concerns and care about the survival of the firm or the welfare of its employees. They also have larger wealth at stake"


"Family block ownership is related to a 32% faster exit from bankruptcy, where the average time to exit is 446 days, and a 12% higher recovery rates for lenders, where the average recovery rate is 48%. This supports our hypothesis that family blockholders are more efficient in bankruptcy resolution." 

Definitely a worthy read!

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