A University of Iowa professor who has studied bankruptcies says it will be "difficult" for General Motors to emerge from bankruptcy as a stronger company. U-of-I finance professor Erik Lie has just completed a study of corporate bankruptcies.

"A lot of people think of bankruptcies as the end of a company," Lie says, "but really it’s a new beginning and it’s designed to give the company a clean slate."

But Lie’s his research found companies that go through Chapter 11 emerge with too much debt.

"These companies don’t get this brand new start as they should," he says. "The debt…is…with them throughout this process and they can’t quite shake it off."

According to Lie, companies that go through bankruptcy are less profitable than their competitors, too. Lie says the restructuring of union contracts and the federal government’s direct involvement, however, makes that General Motors situation unique.

"From that perspective it’s possible that they will not be hampered in the same way as other companies that have a lot of debt," Lie says. "…I don’t think that G.M. will be able to completely restructure neither its operations nor its capital structure so it’s very possible that G.M. is going to emerge as a company that is not going to be quite ready for the new world yet."

A ground-breaking article Lie published in mid-2005 questioned the timing of stock options for corporate CEO’s, suggesting hundreds of companies routinely manipulated accounting to ensure top executives earned top dollar on their sales of stock. His research led the Securities and Exchange Commission to investigate dozens of companies and prompted new accounting rules in the marketplace to prevent backdated stock transactions.

Lie made his comments about General Motors’ bankruptcy in a video posted on the University of Iowa’s website.