Journal of the Indiana Academy of the Social Sciences

Document Type



In light of the Financial Accounting Standards Board’s August 2014 Accounting Standard Update on management Going Concern Statements, research using financial ratios to predict bankruptcy is more relevant than ever. Even though numerous research articles examine factors that predict bankruptcy, few make the distinction between the factors that affect Chapter 7 versus Chapter 11 bankruptcy. This work examines the factors that affect these two bankruptcy types (7 and 11) using the Securities and Exchange Commission data on 425 firms that filed for Chapter 7 or Chapter 11 bankruptcy. We tested our data using t-test, ordinary least squares (OLS), and logistic regression. Our results indicate that the asset turnover ratio and going concern statement are significant predictors of Chapter 7 versus Chapter 11 bankruptcy. We note the implications for auditors, corporate management, corporate creditors and investors, and the Financial Accounting Standards Board.