Information problems, conflicts of interest, and asset stripping: Chapter 11's failure in the case of Eastern Airlines

• 成果类型: Article
• 署名作者: Weiss, LA; Wruck, KH
• 署名单位: Harvard University; INSEAD Business School
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/S0304-405X(98)00004-X
• 发表日期: 1998
• 页码: 55-97
• 关键词: labour unions; airline industry; bankruptcy; Financial distress; Agency problems

摘要

Eastern Airlines' bankruptcy illustrates the devastating effect on firm value of court-sponsored asset stripping, i.e., the use of creditors' collateral to invest in high-variance negative net present value projects. During its bankruptcy, Eastern's value dropped over 50%. A substantial portion of this value decline occurred because an overprotective court insulated Eastern from market forces and allowed value-destroying operations to continue long after it was clear that Eastern should have been shut down. The failure of Eastern's Chapter 11 demonstrates the importance of having a bankruptcy process that protects a distressed firm's assets, not simply from a run by creditors, but also from overly optimistic managers and misguided judges. (C) 1998 Elsevier Science S.A. All rights reserved.