Liquidation Values, Risk and Capital Structure
AbstractThis paper investigate the interaction between financial structure, liquidation values and product market equilibrium. Liquidation values depend on how many firms are liquidated, and therefore on the industry equilibrium of capital structures and of technology choices. We show that firms using a technology with high liquidation value issue less debt than those with low liquidation bvalue even if these ones may be inefficiently liquidated. With respect to the equilibrium in the industry we obrtain that even if in equilibrium all firms use the same technology, firms will use widely different capital structures.
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Bibliographic InfoPaper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 1999-32.
Date of creation: 1999
Date of revision:
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capital; structure; technology choice; industry equilibrium; financial contracts;
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
This paper has been announced in the following NEP Reports:
- NEP-ALL-1999-04-27 (All new papers)
- NEP-CFN-1999-04-27 (Corporate Finance)
- NEP-FIN-1999-04-27 (Finance)
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