Multiple Creditors and Information Rights: Theory and Evidence from US Firms
AbstractWe analyse how a firm allocates information rights across its multiple banks. By differentiating information disclosed, a firm prevents its banks from continuing projects (possibly unsound) solely in order to use their superior information and seize assets during the reorganization. Informational diversity can also lead to the premature liquidation of sound projects, however. We derive the optimal allocation of information as a function of the redeployability and the heterogeneity of the firm’s assets, and of the costs of restructuring the firm in distress. Using a sample of US firms, we find evidence that supports the empirical predictions of the model.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4278.
Date of creation: Mar 2004
Date of revision:
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Find related papers by JEL classification:
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ACC-2004-06-13 (Accounting & Auditing)
- NEP-ALL-2004-06-13 (All new papers)
- NEP-CFN-2004-06-13 (Corporate Finance)
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