Benjamin Iverson

Iverson, Benjamin, Victoria Ivashina and David Smith. 2016. The Ownership and Trading of Debt Claims in Chapter 11 Restructuring. Journal of Financial Economics. 119(2): 316-335.

Using a novel dataset that covers individual debt claims against 136 bankrupt U.S. companies and includes information on a subset of claims transfers, we provide new empirical insight regarding how a firm's debt ownership relates to bankruptcy outcomes. Firms with higher debt concentration at the start of the case are more likely to file prearranged bankruptcy plans, to move quickly through the restructuring process, and to emerge successfully as independent going concerns. Moreover, higher ownership concentration within a debt class is associated with higher recovery rates to that class. Trading of claims during bankruptcy concentrates ownership further but this trading is not associated with subsequent improvements in bankruptcy outcomes and may, at the margin, increase the likelihood of liquidation.

Iverson, Benjamin. 2015. Get in Line: Chapter 11 Restructuring in Crowded Bankruptcy Courts.

This paper tests whether Chapter 11 restructuring outcomes are affected by time constraints in busy bankruptcy courts. On average, total bankruptcy filings rise by 32% during economic recessions, leaving bankruptcy judges with far less time per case exactly when financial distress is worst. Using the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) in 2005 as an exogenous shock that decreased caseloads dramatically, I estimate the impact of bankruptcy caseload changes on the outcomes of firms in Chapter 11. I find that as bankruptcy judges become busier they tend to become more pro-debtor, allowing more firms to reorganize and liquidating fewer firms. This is particularly true for larger firms. Firms that reorganize in busy courts are more likely to re-file for bankruptcy within three years of their original filing. In addition, busy courts impose costs on local banks, which report higher charge-offs on business lending when caseload increases. The economic magnitude of these effects is large: the average rise in judge caseload during an economic recession results in 27% more firms being reorganized, 47% higher charge-off rates, and doubles the share of firms that re-file for bankruptcy.

Iverson, Benjamin, Shai Bernstein and Emanuele Colonnelli. 2016. Asset Allocation in Bankruptcy.

This paper investigates the consequences of liquidation and reorganization on the allocation and subsequent utilization of assets in bankruptcy. We identify 129,000 bankrupt establishments and construct a novel dataset that tracks the occupancy, employment and wages paid at real estate assets over time. Using the random assignment of judges to bankruptcy cases as a natural experiment that forces some firms into liquidation, we find that even after accounting for reallocation, the long-run utilization of assets of liquidated firms is lower relative to assets of reorganized firms. These effects are concentrated in thin markets with few potential users, in areas with low access to finance, and in areas with low economic growth. The results highlight that different bankruptcy approaches affect asset allocation and utilization particularly when search frictions and financial frictions are present.