Merchants in medieval Venice who failed to pay their debts were closed by banca rotta - the breaking of the bench from which they did their business. In some cases today, bankruptcy is seen as a beautiful strategic maneuver. While there are currently some positive aspects which can be attributed to filing for bankruptcy, there is still debate as to its merits as a strategy. To allow for a more detailed understanding of the strategic bankruptcy concept, the author defines, identifies and categorizes types of bankruptcies. To address the issue of whether bankruptcy is a worthwhile strategy the author also presents a study of the effectiveness of bankruptcy in advancing long-run shareholder wealth. A sample of 155 bankruptcies was employed to study the impact of various strategies on returns to shareholders. Some types of strategies were found to result in significantly greater returns than average.
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