Game Theoretic Analysis of Negotiations under Bankruptcy
AbstractWe extend the contingent claims framework for the levered firm in explicitly modeling the resolution of financial distress under formal bankruptcy as a non-cooperative game between claimants under the supervision of the bankruptcy judge. The identity of the class of claimants proposing the first reorganization plan is found to be a key determinant of the likelihood of liquidation and of the renegotiated value of claims. Our quantitative results confirm the economic intuition that a bankruptcy design must trade-off the initial priority of claims with the viability of reorganized firms.
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Bibliographic InfoPaper provided by CIRPEE in its series Cahiers de recherche with number 1113.
Date of creation: 2011
Date of revision:
Bankruptcy procedure; game theory; dynamic programming;
Find related papers by JEL classification:
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- 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-ALL-2011-06-11 (All new papers)
- NEP-GTH-2011-06-11 (Game Theory)
- NEP-HPE-2011-06-11 (History & Philosophy of Economics)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Mella-Barral, Pierre, 1999. "The Dynamics of Default and Debt Reorganization," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 535-78.
- Mella-Barral, Pierre & Perraudin, William, 1997.
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Journal of Finance,
American Finance Association, vol. 52(2), pages 531-56, June.
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