IDEAS home Printed from https://ideas.repec.org/a/rje/bellje/v12y1981ispringp321-328.html
   My bibliography  Save this article

The Effects of Imminent Bankruptcy on Stockholder Risk Preferences and Behavior

Author

Listed:
  • Devra L. Golbe

Abstract

The conditions derived by Bulow and Shoven concerning the circumstances under which a firm goes bankrupt, can be used to draw inferences about stockholders risk preferences. Bankruptcy becomes less likely, the higher the expected value of the firm as a going concern and, in some interesting cases, the higher the variance of profits. Because stockholders' returns are truncated from below, mean-preserving increases in the variance of firm returns increase only the expected value of stockholders' returns and not their risk. Thus, although equity holders may be risk neutral or risk averse with respect to their own returns, they may be risk preferring with regard to firm returns.

Suggested Citation

  • Devra L. Golbe, 1981. "The Effects of Imminent Bankruptcy on Stockholder Risk Preferences and Behavior," Bell Journal of Economics, The RAND Corporation, vol. 12(1), pages 321-328, Spring.
    • Handle: RePEc:rje:bellje:v:12:y:1981:i:spring:p:321-328
    as

    Download full text from publisher

    File URL: http://links.jstor.org/sici?sici=0361-915X%28198121%2912%3A1%3C321%3ATEOIBO%3E2.0.CO%3B2-D&origin=repec
    File Function: full text
    Download Restriction: Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Richardson, Grant & Lanis, Roman & Taylor, Grantley, 2015. "Financial distress, outside directors and corporate tax aggressiveness spanning the global financial crisis: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 52(C), pages 112-129.
    2. Lawrence J. White, 1990. "Problems Of The Fslic: A Former Policy Maker'S View," Contemporary Economic Policy, Western Economic Association International, vol. 8(2), pages 62-81, April.
    3. Devra L. Golbe & Bernard Shull, 1991. "Risk Taking By Thrift Institutions: A Framework For Empirical Investigation," Contemporary Economic Policy, Western Economic Association International, vol. 9(3), pages 106-115, July.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rje:bellje:v:12:y:1981:i:spring:p:321-328. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://www.rje.org .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.