The probability of Chapter 11 firms refiling again: a censored hazard approach

Firms seeking bankruptcy protection for the second time may seem inefficient, particularly for courts and other key stakeholders involved in the debtor firm's reorganization process. In our study, we analyse the survival and hazard patterns of firms that applied for a second bankruptcy protection, after emerging successfully from their first. Debtor firms surviving 33 months after emerging from their first bankruptcy protection are less likely to refile again. We note evidence of firms' debt levels being the main financial characteristic connected with refiling. When we control for the introduction of the Bankruptcy Abuse Prevention and Consumer Protection Act, we report no significant impact on firm recidivism. We identify a structural break with respect to factors determining the probability of refiling: around 2018 firm size and pre-agreed bankruptcy negotiations stopped being a significant characteristic to firms refiling for the second time. Overall, we note that the financial/non-financial characteristics affecting the first filing does not necessarily apply to their second filing. Such findings have implications for policy-makers and key stakeholders.