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Iverson, Benjamin

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Iverson, Benjamin

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2013 - 20152

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    Essays in Corporate and Consumer Finance
    (2013-10-07) Iverson, Benjamin; Ivashina, Victoria; Gilson, Stuart; Scharfstein, David; Stein, Jeremy; Green, Jerry
    The first essay tests whether Chapter 11 restructuring outcomes are affected by time constraints in busy bankruptcy courts. Using the passage of the Bankruptcy Abuse Prevention and Consumer Protection Act in 2005 as an exogenous shock to court caseloads, I estimate the impact of bankruptcy caseload changes on the outcomes of firms in Chapter 11. I find that as bankruptcy judges become busier they tend to allow more firms to reorganize. Firms that reorganize in busy courts spend longer in bankruptcy, while firms that are dismissed from busy courts are more likely to re-file for bankruptcy within three years of their original filing. In addition, busy courts impose costs on local banks, which report higher charge-offs on business lending when caseload increases. Using novel data that has complete coverage of claims for 136 Chapter 11 bankruptcy protection filings and that includes detailed information on claims transfers, in the second essay we provide the first empirical insight on how a firm's ownership changes during the bankruptcy process and how these changes impact bankruptcy outcomes. Pre-bankruptcy ownership concentration is important for the coordination of a prearranged bankruptcy filing and is associated with a faster bankruptcy resolution and a higher likelihood of a successful reorganization. However, as the trading of claims in bankruptcy concentrates ownership further, the probability of liquidation increases and recovery rates decrease. The third essay studies whether prize-linked savings (PLS) accounts, which offer random, lottery-like payouts to account holders in lieu of risk-free interest, can aid individuals in increasing savings levels by adding the chance to "win big." Using micro-level data, we show that PLS is attractive to a broad group of individuals across all age, race, and income levels. We find that financially constrained individuals and those with no other deposit accounts are particularly likely to open a PLS account. Participants in the PLS program increased their total savings on average by 1.1% of annual income, a 31% increase form the mean level of savings. Deposits in PLS do not cannibalize savings in standard savings products. Instead, PLS appears to act as a substitute for lottery gambling.
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    The Ownership and Trading of Debt Claims in Chapter 11 Restructurings
    (Elsevier, 2015-05-19) Ivashina, Victoria; Iverson, Benjamin; Smith, David C.
    What is the ownership structure of bankrupt debt claims? How does the ownership evolve though bankruptcy? And how does debt ownership influence Chapter 11 outcomes? To answer these questions, we construct a data set that identifies the entire capital structure for 136 companies filing for U.S. Chapter 11 bankruptcy protection between 1998 and 2009 and that covers over 71,000 different investors. We categorize the investors in the capital structure of bankrupt firms according to their institutional type and track them from the initial filing until the vote on the plan of reorganization. We document several novel facts about the role of different institutional investors, the impact of debt ownership concentration, and the role of trading in bankruptcy. We find that trading during the case leads to higher concentration of ownership, particularly among debt claims that are eligible to vote on the bankruptcy plan of reorganization. Active investors, including hedge funds, are the largest net buyers of claims in bankruptcy. While initial ownership concentration is important for coordination of a prearranged bankruptcy filing, it is consolidation of ownership during bankruptcy—and specifically consolidation of ownership of voting classes—that has an impact on the speed of restructuring, the probability of liquidation, and class-level as well as overall recovery rates.