Contrary to popular perception, more large public businesses filed for bankruptcy in the United States in 1998 than in any year in history, except the "boom" years of the early 1990s. This year's rate is also a whopping 57 percent higher than 1997's.

The findings were revealed by Lynn M. LoPucki, a Cornell University professor who specializes in bankruptcy law. He culled the information from an independent Bankruptcy Research Database he developed that focuses entirely on large, public companies. While figures put out by the Administrative Office of the U.S. Courts show that bankruptcy filings are down among U.S. companies in general, that office does not separate out data on large, publicly held companies. LoPucki's database, which does, reveals the opposite trend.

The law professor's database, which contains more than 100 fields of data on each of the more than 300 large public company bankruptcies filed since 1980, shows that 22 such companies, each with assets in excess of $200 million, have filed for reorganization under Chapter 11 of the Bankruptcy Code from January to mid-October of this year. In comparison, only 15 companies that large filed in all of 1997. The record was set in 1991, when 41 large, public companies filed for bankruptcy.

The stock market--driven acquisition and expansion binge by public companies over the last several years has racked up record levels of debt, LoPucki observed. "That is fueling the increase in bankruptcy filings," he said. "These filings are driven by debt. If you look at companies' ratios of debt to revenue, you'll see it's up significantly from several years ago. More bankruptcy filings is the end result."

LoPucki's findings fit some experts' belief that business bankruptcy filings increase during good economic times and drop off during recessions. The assumption is that many new businesses will start up or expand when debt is cheap. Some of them will overexpand and then collapse or retrench.

Another finding of the law professor's database: exactly half of this year's filings (11 out of 22) and 86 percent (12 out of 14) in 1996 were in Delaware, suggesting that the state is more bankruptcy friendly than other states. "Clearly some of the litigants wanted the Delaware bankruptcy system," said LoPucki, "but why they chose it is a matter of controversy."

All companies that file for bankruptcy in the United States must do so in district courts, explained LoPucki, which then automatically refer the cases to bankruptcy judges. "But in early 1997, Chief Judge Joseph Farnan Jr. of the United States District Court in Delaware took the unprecedented step of revoking the automatic reference to the bankruptcy judges," LoPucki noted. Although no large public companies filed for bankruptcy in the five months following Farnan's order, filings resumed in July 1997. Since then bankruptcy filings in Delaware have accounted for a steady 50 percent of all U.S. bankruptcy filings for large, public companies.

These findings and others revealed in LoPucki's Bankruptcy Research Database should be useful to many.

"My aim is for the database to become the research tool of choice for academics, cooperating lawyers and the press," said LoPucki.

The database, which enables users to run their own studies, is semiprivate, with LoPucki controlling access. He began assembling it in 1993 with the aid of research assistants in the Cornell Law School. An abbreviated version of the database is available to the public at http://teddy.law.cornell.edu:8090/lopucki.htm.