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Vulture Funds and the Fresh Start Accounting Value of Firms Emerging from Bankruptcy

Gietzmann, M., Isidro, H. & Raonic, I. (2018). Vulture Funds and the Fresh Start Accounting Value of Firms Emerging from Bankruptcy. Journal of Business Finance and Accounting, 45(3-4), pp. 410-436. doi: 10.1111/jbfa.12303


We study how distress-oriented hedge funds (vulture funds) play an important role in the fresh start valuation of firms emerging from Chapter 11 reorganization. We find that loanto-own vultures acquire debt positions of the distressed firm that grant dominant power in the bankruptcy negotiations, and they then use the discretion allowed by fresh start accounting to introduce valuation bias in their favor. We show that the strategic influence over fresh start values can create opportunities to increase vulture investors’ returns at the expense of other claim holders.

Publication Type: Article
Additional Information: This is the peer reviewed version of the following article: Gietzmann, M, Isidro, H, Raonic, I. Vulture funds and the fresh start accounting value of firms emerging from bankruptcy. Journal of Business Finance & Accounting. 2018; 45: 410– 436, published in final form on 7 Feb 2018 at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
Publisher Keywords: distress, bankruptcy, valuation, hedge fund, reporting discretion
Departments: Bayes Business School > Finance
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