Predicting the Exit: The Determinants of Chapter 11 Survival for Distressed Debt Investors

Abstract

This paper investigates the determinants of Chapter 11 bankruptcy survival among large public companies, bridging recent academic literature on emergence outcomes with the practical decision-making of distressed debt investors, a perspective absent from prior work and one that translates survival research into an actionable investment framework. Drawing on the Florida-UCLA-LoPucki Bankruptcy Research Database and Compustat financial data, a logit regression estimated on 423 large public companies identifies CEO replacement, net working capital, long-term debt, and judicial experience as the primary determinants of emergence. These findings are translated into a sequential investment screening framework for evaluating which Chapter 11 proceedings are structurally positioned to succeed, with implications extending beyond returns to the efficient allocation of capital toward reorganizations most capable of preserving jobs, relationships, and economic value that emergence protects.