search query: @author Wruck, K. H. / total: 6
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| Author: | Weiss, L. A. Wruck, K. H. |
| Title: | Information problems, conflicts of interest, and asset stripping : Chapter 11's failure in the case of Eastern Airlines. |
| Journal: | Journal of Financial Economics
1998 : APR , VOL. 48:1, p. 55-97 |
| Index terms: | TRADE UNIONS AIRCRAFT INDUSTRY BANKRUPTCY FINANCIAL CRISES AGENCIES |
| Language: | eng |
| Abstract: | Eastern Airlines' bankruptcy illustrates the devastating effect on firm value of courtspnsored 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 occured 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. |
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