Creditor coordination, liquidation timing, and debt valuation

Bruche, M. (2011). Creditor coordination, liquidation timing, and debt valuation. Journal of Financial and Quantitative Analysis, 46(5), pp. 1407-1436. doi: 10.1017/S0022109011000330

[img]
Preview
PDF
Download (284kB) | Preview

Abstract

This paper derives closed-form solutions for values of debt and equity in a continuous-time structural model in which the demands of creditors to be repaid cause a firm to be put into bankruptcy. This allows discussion of the effect of creditor coordination in recovering money on the values of debt, equity, and the firm, as well as on optimal capital structure. The effects of features of bankruptcy codes that prevent coordination failures between creditors, such as automatic stays and preference law, are also considered. The model suggests that such features, while preventing coordination failures, can decrease welfare.

Item Type: Article
Subjects: H Social Sciences > HG Finance
Divisions: Cass Business School > Faculty of Finance
URI: http://openaccess.city.ac.uk/id/eprint/2794

Actions (login required)

View Item View Item

Downloads

Downloads per month over past year

View more statistics