IDEAS home Printed from
MyIDEAS: Log in (now much improved!) to save this paper

Bankcruptcy Law and Firms’ Behavior

Listed author(s):
  • Anne Epaulard

    (University of Paris Dauphine and Cepremap)

  • Aude Pommeret

    (University of Lausanne and Ires)

The aim of this paper is to study the impact of the bankruptcy law on financing, investment, default and liquidation decisions of firms. We build a model in which the firm has the opportunity to get into debt to finance an investment whose return is stochastic. Shareholdersand bondholders bargain the amount of debt and the level of the coupon. Because of uncertainty, the firm may default. The firm manager takes investment and default decisions in order to maximize the value of equity. At default, the firm enters an observation period after which it is decided whether it liquidates or goes on with production. The model is calibrated in order to reproduce French firms characteristics. We then study the effect on financing, investment, default and liquidation decisions of the firms, of changes in the representative parameters of the bankruptcy procedure.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

Paper provided by Swiss Finance Institute in its series Swiss Finance Institute Research Paper Series with number 07-08.

in new window

Length: 37 pages
Date of creation: Feb 2006
Handle: RePEc:chf:rpseri:rp0708
Contact details of provider: Web page:

More information through EDIRC

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp0708. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Marilyn Barja)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.