Financial distress, bank debt restructurings, and layoffs
AbstractWe develop a model of a financially distressed firm to analyze the implications of a bank debt restructuring when the operational characteristics of the firm's project for the post-distress period are endogenously determined as part of the workout. We establish a formal link between the debt restructuring and operational actions such as employee layoffs, and show how these actions are affected by the firm's capital structure, the ordering of absolute priorities, and the allocation of control rights and residual claims after reorganization. Finally, we discuss the implications of our analysis for the design of reorganization law.
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Bibliographic InfoArticle provided by Springer in its journal Spanish Economic Review.
Volume (Year): 2 (2000)
Issue (Month): 2 ()
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Find related papers by JEL classification:
- G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
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