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Corporate response to distress: evidence from the Asian financial crisis

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  • Rajdeep Sengupta
  • Mara Faccio

Abstract

This paper provides a comprehensive examination of corporate responses to financial distress during an economy-wide crisis, specifically through the restructuring of assets (through asset sales, mergers, or liquidations) and/or liabilities. Using firm-level data from five countries hardest hit by the East Asian financial crisis of 1997-98, this study contrasts the effects of financial and corporate governance variables on restructuring choices. The study finds that, during a crisis, financial constraints and corporate governance each have a large effect on the restructuring choice.

Suggested Citation

  • Rajdeep Sengupta & Mara Faccio, 2011. "Corporate response to distress: evidence from the Asian financial crisis," Review, Federal Reserve Bank of St. Louis, issue Mar, pages 127-154.
  • Handle: RePEc:fip:fedlrv:y:2011:i:mar:p:127-154:n:v.93no.2
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    References listed on IDEAS

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    Cited by:

    1. Ilhyock Shim & Goetz von Peter, 2007. "Distress selling and asset market feedback," BIS Working Papers 229, Bank for International Settlements.
    2. Konov, Joshua Ioji / JK, 2013. "Enhancing Markets (i.e. Economies) Transmissionability to Optimize Monetary Policies’ Effect," MPRA Paper 46950, University Library of Munich, Germany.
    3. Konov, Joshua Ioji, 2012. "Market Economy under Rapid Globalization and Rising Productivity," MPRA Paper 48750, University Library of Munich, Germany.

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