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How to Sell a (Bankrupt) Company?

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Author Info

  • Cornelli, Francesca
  • Felli, Leonardo

Abstract

The restructuring of a bankrupt company often entails its sale. This Paper suggests a way to sell the company that maximizes the creditors' proceeds. The key to this proposal is the option left to the creditors to retain a fraction of the shares of the company. Indeed, by retaining the minority stake, creditors can transfer the control of the company while reducing to a minimum the rents that the sale of the company leaves in the hands of the buyer.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 2881.

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Date of creation: Jul 2001
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Handle: RePEc:cpr:ceprdp:2881

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Related research

Keywords: auctions; bankruptcy; private benefits; transfer of control;

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References

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  1. Shleifer, Andrei & Vishny, Robert W., 1986. "Large Shareholders and Corporate Control," Scholarly Articles 3606237, Harvard University Department of Economics.
  2. Mike Burkart & Denis Gromb & Fausto Panunzi, 1998. "Why Higher Takeover Premia Protect Minority Shareholders," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 172-204, February.
  3. Roger B. Myerson, 1978. "Optimal Auction Design," Discussion Papers 362, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Leonardo Felli & Francesca Cornelli, 1998. "Revenue Efficiency and Change of Control: The Case of Bankruptcy," FMG Discussion Papers dp300, Financial Markets Group.
  5. Jeremy Bulow & Ming Huang & Paul Klemperer, 1999. "Toeholds and Takeovers," Journal of Political Economy, University of Chicago Press, vol. 107(3), pages 427-454, June.
  6. Philippe Aghion & Oliver D. Hart & John Moore, 1994. "The Economics of Bankruptcy Reform," NBER Chapters, in: The Transition in Eastern Europe, Volume 2: Restructuring, pages 215-244 National Bureau of Economic Research, Inc.
  7. Sanford J. Grossman & Oliver D. Hart, 1987. "One Share/One Vote and the Market for Corporate Control," NBER Working Papers 2347, National Bureau of Economic Research, Inc.
  8. Zheng, Charles Zhoucheng, 2002. "Optimal Auction with Resale," Staff General Research Papers 12664, Iowa State University, Department of Economics.
  9. Bolton, Patrick & Scharfstein, David S, 1996. "Optimal Debt Structure and the Number of Creditors," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 1-25, February.
  10. Zingales, Luigi, 1995. "Insider Ownership and the Decision to Go Public," Review of Economic Studies, Wiley Blackwell, vol. 62(3), pages 425-48, July.
  11. Samuelson, William, 1987. "Auctions with Contingent Payments: Comment," American Economic Review, American Economic Association, vol. 77(4), pages 740-45, September.
  12. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Wiley Blackwell, vol. 59(3), pages 473-94, July.
  13. Burkart, Mike, 1995. " Initial Shareholdings and Overbidding in Takeover Contests," Journal of Finance, American Finance Association, vol. 50(5), pages 1491-1515, December.
  14. Riley, John G, 1988. "Ex Post Information in Auctions," Review of Economic Studies, Wiley Blackwell, vol. 55(3), pages 409-29, July.
  15. Haile,P.A., 1999. "Auctions with resale," Working papers 33, Wisconsin Madison - Social Systems.
  16. Hansen, Robert G, 1985. "Auctions with Contingent Payments," American Economic Review, American Economic Association, vol. 75(4), pages 862-65, September.
  17. Bebchuk, Lucian Arye, 1994. "Efficient and Inefficient Sales of Corporate Control," The Quarterly Journal of Economics, MIT Press, vol. 109(4), pages 957-93, November.
  18. Matthew Rhodes-Kropf & S. Viswanathan, 2000. "Corporate Reorganizations and Non-Cash Auctions," Journal of Finance, American Finance Association, vol. 55(4), pages 1807-1854, 08.
  19. Lawrence M. Ausubel & Peter Cramton, 1998. "The Optimality of Being Efficient," Papers of Peter Cramton 98wpoe, University of Maryland, Department of Economics - Peter Cramton, revised 18 Jun 1999.
  20. Gilson, Stuart C., 1990. "Bankruptcy, boards, banks, and blockholders : Evidence on changes in corporate ownership and control when firms default," Journal of Financial Economics, Elsevier, vol. 27(2), pages 355-387, October.
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Citations

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Cited by:
  1. At, Christian & Burkart, Mike & Lee, Samuel, 2007. "Security-Voting Structure and Bidder Screening," CEPR Discussion Papers 6241, C.E.P.R. Discussion Papers.
  2. Mehmet Ekmekci & Nenad Kos & Rakesh Vohra, 2013. "Just Enough or All: Selling a Firm," Working Papers 470, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.

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