Empirical Estimates of Filtering Failure in Court-Supervised Reorganization


  • Timothy C.G. Fisher,

  • Jocelyn Martel

    Corresponding authorSearch for more papers by this author
    • Fisher is Associate Professor at Wilfrid Laurier University. Martel is Associate Professor at Université de Cergy Pontoise, THEMA and Visiting Professor at ESSEC.

*E-mail jocelyn.martel@ecu.u-cergy.fr.


We present the first comprehensive empirical estimates of filtering failure in court-supervised reorganization. Using a sample of 303 firms attempting reorganization in Canada during 1977–1988, we find that Type I errors (accepting a plan from a nonviable firm) are four times more likely to occur than Type II errors (rejecting a plan from a viable firm) and that the incidence of filtering failure is between 22 and 53 percent or 18 and 44 percent, depending on the definition of a firm's viability.