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Revenue Efficiency and Change of Control: The Case of Bankruptcy

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  • Leonardo Felli
  • Francesca Cornelli

Abstract

The restructing of a bankrupt company often entails a change of control. By efficiency of a bankruptcy procedure it is usually meant that the control is allocated into the hands of those who can maximise its value. In this paper we focus instead on how to allocate control with a procedure that allows creditors to maximise their returns. The conclusion is that creditors should be allowed to retain a fraction of the shares of the company.

Suggested Citation

  • Leonardo Felli & Francesca Cornelli, 1998. "Revenue Efficiency and Change of Control: The Case of Bankruptcy," FMG Discussion Papers dp300, Financial Markets Group.
    • Handle: RePEc:fmg:fmgdps:dp300
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    References listed on IDEAS

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    Cited by:

    1. Renée Birgit Adams & Francesca Cornelli & Leonardo Felli, 2012. "How to Sell a (Bankrupt) Company," International Review of Finance, International Review of Finance Ltd., vol. 12(2), pages 197-226, June.
    2. Ernst-Ludwig VON THADDEN & Erik BERGLÖF & Gérard ROLAND, 2003. "Optimal Debt Design and the Role of Bankruptcy," Cahiers de Recherches Economiques du Département d'économie 03.13, Université de Lausanne, Faculté des HEC, Département d’économie.
    3. Mitchell Berlin & Loretta J. Mester, 2000. "Optimal financial contracts for large investors: the role of lender liability," Working Papers 00-1, Federal Reserve Bank of Philadelphia.

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    More about this item

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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