Does uncertainty always harm the creditor’s interest?
Résumé
Corporate restructuring involves strategic actions designed to restore a firm’s financial stability and long-term viability. However, uncertainty may reduce the effectiveness of such measures, limiting debt repayment. This study aims to investigate the impact of uncertainty on debt recovery rates for creditors in corporate restructuring under US Chapter 11. It employs explainable artificial intelligence (XAI) modelling and fuzzy set qualitative comparative analysis (fsQCA) to identify conditions that lead to high recovery rates for both secured and unsecured creditors. Contrary to conventional wisdom, the findings suggest that uncertainty does not uniformly harm creditors' interests. Secured creditors achieve larger repayments when restructuring occurs during less uncertain periods, while unsecured creditors experience higher recovery rates when the procedure begins in a stable period and the reorganization plan is confirmed during high uncertainty. These results underscore the strategic potential of restructuring procedures and have implications for policymakers and practitioners involved in corporate restructuring.