Banking

Post-Chapter 11 Bankruptcy Performance: Avoiding Chapter 22

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Executive Summary

This paper extends the use of bankruptcy prediction models to a new application: the assessment of the health of industrial companies as they emerge from the Chapter 11 bankruptcy process, including the probability that the companies will have to file for bankruptcy again - the so-called "Chapter 22" phenomenon. The predictive ability of this modified Z-Score suggests it can be used as a effective tool for evaluating the quality and efficacy of the bankruptcy reorganization plan.

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