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According to a recent study, companies that are taking steps to reorganize their asbestos-related liabilities under bankruptcy laws are operating successfully and are likely to become “significantly stronger” in the future.

This research, by Dr. George J. Benston, a professor of finance at Emory University, has cast doubt on claims that asbestos lawsuits are driving companies out of business. It also flies in the face of proposed legislation that would prohibit asbestos victims from having their day in court—based on the belief that the litigation would be devastating to the economy.

Dr. Benston studied seven of the largest companies with asbestos-related liabilities. Each had sought reorganization under Chapter 11 of the Bankruptcy Code, meaning that the companies could consolidate and resolve their asbestos-related liabilities while continuing business operations.

“On the whole, they essentially have increased or stabilized their sales, assets, employment and profitability, and have projected increases,” Dr. Benston concluded. “It is fair to say that they are viable and are likely to be increasingly successful companies that should generate funds to exit bankruptcy significantly stronger than when they went in.”

Using filings from the Securities and Exchange Commission and other public data, Dr. Benston found that most of the companies had increased employment levels, and all of the companies had remained profitable.

“Indeed, with few exceptions, they have prospered, increasing their sales,” Dr. Benston wrote. “They have been able to maintain their assets and employment, meet their obligations to business creditors and employees and make capital investments that will allow them to continue to prosper.”

One of the companies, Babcock & Wilcox, increased employment by 39 percent after seeking reorganization. Babcock & Wilcox has publicly stated that its “core business continues to be strong” and that asbestos liabilities should have no negative effect on “salaries, benefits or promotion opportunities.”

Owens Corning, another of the companies studied, continues to describe itself as a “world leader” in the building materials industry, with annual sales of about $5 billion. Owens Corning predicts that its reorganization plan will allow it to resolve its asbestos liabilities “in a fair and responsible manner” while maintaining its focus on “competing successfully in the global marketplace.”

According to the Environmental Working Group (EWG), a nonprofit research organization, claims that asbestos lawsuits are “bankrupting” businesses are misleading. “When most people hear that a company is going bankrupt, they think liquidation of assets, massive layoffs and shutting down the business,” the group explains in a report on asbestos. Under 1994 amendments to the Bankruptcy Code, companies with asbestos-related liabilities can reorganize their present and future liabilities without liquidating their assets. These reorganizations are appealing to companies because they protect the company from all future asbestos claims against them and all of their subsidiaries.

“Clearly these companies have not ‘gone bankrupt’ in the sense commonly imagined by the public and invoked by politicians who are pressing for ‘asbestos litigation reform.’” According to the EWG report, “. . .asbestos reorganizations are a relatively smooth and equitable way for a company to assist the families of workers and others injured or killed by asbestos.”