The losses suffered by creditors in bankruptcy in the UK and Germany

There has been much interest in finance theory in the question of how they cost of bankruptcy influences the firm's capital structure. Authors such as Modigliani and Miller (1956), Stiglitz (1969), Bulow and Shoven (1978), Titman (1984) and Barnea, Haugen and Senbet (1984) have provided much theoretical analysis. However, very few empirical studies have been conducted. Notable exceptions are those by Warner (1977) and Altman (1984). These studies looked only at bankruptcy cases in the US. One of the main problems in bankruptcy cost measurement is that there is little agreement on definition of bankruptcy cost components. In addition, the distribution of these costs has not been studied in any great detail in finance theory so far