Direct Bankruptcy Costs: Evidence from the Trucking Industry

Daryl M. Guffey · William Ted Moore

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Corporate Insolvency and Governance Corporate Finance and Governance Financial Distress and Bankruptcy Prediction

Abstract

Abstract Direct costs of bankruptcy are measured for a sample of firms in the trucking industry that petitioned for bankruptcy protection from 1970 to 1985. Average direct bankruptcy costs represent 9.12 percent of the book value of total assets as of the year before filing. These costs are large compared with those reported in prior studies: 3.39 percent of book value of assets for retail firms, 4.31 percent for industrials, and .53 percent for railroads. We also find evidence of substantial economies of scale in bankruptcy costs in the trucking sample.

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References

1904The Proof and Measurement of Association between Two Things 1963CORPORATE INCOME TAXES AND THE COST OF CAPITAL: A CORRECTION 1980Optimal capital structure under corporate and personal taxation 1977DEBT AND TAXES*1973A STATE‐PREFERENCE MODEL OF OPTIMAL FINANCIAL LEVERAGE 1984The effect of capital structure on a firm's liquidation decision 1984A Further Empirical Investigation of the Bankruptcy Cost Question 1977Bankruptcy Costs: Some Evidence

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