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Corporate Bankruptcy Reorganizations: Estimates From A Bargaining Model

  • Hülya K. K. Eraslan

This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations. Copyright �2008 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

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File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1468-2354.2008.00493.x
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Article provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.

Volume (Year): 49 (2008)
Issue (Month): 2 (05)
Pages: 659-681

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Handle: RePEc:ier:iecrev:v:49:y:2008:i:2:p:659-681
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