We present the first comprehensive empirical estimates of filtering failure in a bankruptcy system. Using a sample of 303 firms attempting reorganization in Canada during 1977-88, we find that Type I errors (accepting a plan from a non-viable firm) are 4 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. Preliminary estimates using the Jensen-Conklin data indicate, interestingly, that Type II errors are much more likely than Type I errors in Chapter 11.
MARTEL, J. and FISHER, T.C.G. (2000). Empirical Estimates of Filtering Failure in Court-supervised Reorganization. ESSEC Business School.