A Real Options Approach to Bankruptcy Costs: Evidence from Failed Commercial Banks During the 1990s
AbstractLiterature identifies three main aspects of liquidation costs: firm size, asset specificity, and industry concentration. This paper unifies the theory behind these aspects of bankruptcy costs by treating them as components of a broader option valuation problem faced by the liquidating trustee. Testing the hypothesized asset price relationships on FDIC failed-bank liquidation data yields the appropriate results. Furthermore, it appears that liquidation time alone can be used as an effective second-order proxy for asset value growth where market value estimates are unavailable.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 78 (2005)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JB/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Fulbert Tchana Tchana, 2009.
"The Welfare Cost of Banking Regulation,"
121, Economic Research Southern Africa.
- Cangemi, Robert R. & Mason, Joseph R. & Pagano, Michael S., 2012. "Options-based structural model estimation of bond recovery rates," Journal of Financial Intermediation, Elsevier, vol. 21(3), pages 473-506.
- Lee, Seung-Hyun & Yamakawa, Yasuhiro & Peng, Mike W. & Barney, Jay B., 2011. "How do bankruptcy laws affect entrepreneurship development around the world?," Journal of Business Venturing, Elsevier, vol. 26(5), pages 505-520, September.
- Daniel C. Hardy, 2013. "Bank Resolution Costs, Depositor Preference, and Asset Encumbrance," IMF Working Papers 13/172, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.