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Corporate Bankruptcy Reorganizations: Estimates From A Bargaining Model

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  • Hülya K. K. Eraslan

Abstract

This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations.

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  • Hülya K. K. Eraslan, 2008. "Corporate Bankruptcy Reorganizations: Estimates From A Bargaining Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 49(2), pages 659-681, May.
    • Handle: RePEc:wly:iecrev:v:49:y:2008:i:2:p:659-681
    DOI: 10.1111/j.1468-2354.2008.00493.x
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