Research

Ilona Bastiaansen, Alina Lerman, Frank Murphy, and Dushyant Vyas
Forthcoming in Journal of Accounting Research

Stakeholders in the Chapter 11 reorganization process face significant information uncertainty about the post-emergence prospects of the firm. The U.S. Bankruptcy Code requires a debtor to provide a disclosure statement containing “adequate information” about its financial status and a proposed reorganization plan but stops short of rigidly defining the adequacy standard. We document the heterogeneity in disclosure statement information across 16 distinct attributes and examine the variation in disclosures along several dimensions that reflect agency costs and
coordination problems. We observe that Chapter 11 disclosure correlates more with claimant- and case-specific characteristics than pre-bankruptcy debtor characteristics. Our results illustrate the importance of institutional features in specific disclosure settings such as bankruptcy court filings. The research questions and methods of this study were registered via the Journal of Accounting
Research’s registration-based editorial process.