Determinants of bankruptcy protection duration for Canadian firms

The present thesis examines the determinants of the bankruptcy protection 
\nduration for Canadian firms. Using a sample of Canadian firms that filed for 
\nbankruptcy protection between the calendar years 1992 and 2009, we fmd that the 
\nfirm age, the industry adjusted operating margin, the default spread, the industrial 
\nproduction growth rate or the interest rate are influential factors on determining the 
\nlength of the protection period. Older firms tend to stay longer under protection from 
\ncreditors. As older firms have more complicated structures and issues to settle, the 
\nrisk of exiting soon the protection (the hazard rate) is small. We also find that firms 
\nthat perform better than their benchmark as measured by the industry they belong to, 
\ntend to leave quickly the bankruptcy protection state. We conclude that the fate of 
\nrelatively successful companies is determined faster. Moreover, we report that it takes 
\nless time to achieve a final solution to firms under bankrupt~y when the default spread 
\nis low or when the appetite for risk is high. Conversely, during periods of high default 
\nspreads and flight for quality, it takes longer time to resolve the bankruptcy issue. This 
\nlast finding may suggest that troubled firms should place themselves under protection 
\nwhen spreads are low. However, this ignores the endogeneity issue: high default 
\nspread may cause and incidentally reflect higher bankruptcy rates in the economy. 
\nIndeed, we find that bankruptcy protection is longer during economic downturns. We 
\nexplain this relation by the natural increase in default rate among firms (and 
\nindividuals) during economically troubled times. Default spreads are usually larger 
\nduring these harsh periods as investors become more risk averse since their wealth shrinks. 
\nUsing a Log-logistic hazard model, we also fmd that firms that file under the 
\nCompanies' Creditors Arrangement Act (CCAA) protection spend longer time 
\nrestructuring than firms that filed under the Bankruptcy and Insolvency Act (BIA). As 
\nBIA is more statutory and less flexible, solutions can be reached faster by court 
\norders.

Récupéré en direct depuis OpenAlex et désinversé. Les résumés ne sont pas conservés dans cette base de données : les index inversés représentent 8,6 Go des 9,3 Go de texte de la base, et le serveur dispose de 13 Go libres.