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Bankruptcy Codes, Liquidation Timing, And Debt Valuation

  • Max Bruche

    ()

    (CEMFI, Centro de Estudios Monetarios y Financieros)

This paper derives closed-form solutions for values of debt and equity in a continuoustime structural model in which the demands of creditors to be repaid cause a firm to be put into bankruptcy. This allows discussing the effect of creditor coordination in recovering money on the values of debt, equity, and the firm. The effects of features of bankruptcy codes that influence creditor coordination such as automatic stays and preference law are also considered. In the model, a lack of creditor coordination reduces the value of debt, but can increase the value of the firm. Automatic stays and preference law increase the value of equity, but can decrease the value of debt and the firm.

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File URL: http://www.cemfi.es/ftp/wp/0902.pdf
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Paper provided by CEMFI in its series Working Papers with number wp2009_0902.

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Date of creation: Jul 2009
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Handle: RePEc:cmf:wpaper:wp2009_0902
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  1. Enrique Sentana & Dante Amegual, 2008. "A Comparison Of Mean-Variance Efficiency Tests," Working Papers wp2008_0806, CEMFI.
  2. Mencía, Javier & Sentana, Enrique, 2009. "Multivariate location-scale mixtures of normals and mean-variance-skewness portfolio allocation," Journal of Econometrics, Elsevier, vol. 153(2), pages 105-121, December.
  3. Roberto Serrano & Rene Saran, 2007. "The Evolution Of Bidding Behavior In Private-Values Auctions And Double Auctions," Working Papers wp2007_0712, CEMFI.
  4. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," Banco de Espa�a Working Papers 0814, Banco de Espa�a.
  5. Moral-Benito, Enrique, 2009. "Determinants of Economic Growth: A Bayesian Panel Data Approach," Policy Research Working Paper Series 4830, The World Bank.
  6. Stefano Gagliarducci & Tommaso Nannicini & Paolo Naticchioni, 2011. "Electoral Rules and Politicians' Behavior: A Micro Test," American Economic Journal: Economic Policy, American Economic Association, vol. 3(3), pages 144-74, August.
  7. Robert J. Aumann & Roberto Serrano, 2007. "An Economic Index of Riskiness," Discussion Paper Series dp446, The Federmann Center for the Study of Rationality, the Hebrew University, Jerusalem.
  8. L. Hospido, 2012. "Modelling heterogeneity and dynamics in the volatility of individual wages," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 27(3), pages 386-414, 04.
  9. Max Bruche & Javier Suarez, 2009. "The Macroeconomics Of Money Market Freezes," Working Papers wp2009_0901, CEMFI.
  10. Roberto Serrano & Antonio Cabrales, 2007. "Implementation in Adaptive Better-Response Dynamics," Working Papers 2007-10, Brown University, Department of Economics.
  11. Rafael Repullo & Javier Suarez, 2008. "The Procyclical Effects Of Basel Ii," Working Papers wp2008_0809, CEMFI.
  12. Roberto Serrano, 2007. "Cooperative Games: Core And Shapley Value," Working Papers wp2007_0709, CEMFI.
  13. Victor Aguirregabiria & Pedro mira, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers tecipa-297, University of Toronto, Department of Economics.
  14. Javier Mencía & Enrique Sentana, 2012. "Distributional Tests in Multivariate Dynamic Models with Normal and Student-t Innovations," The Review of Economics and Statistics, MIT Press, vol. 94(1), pages 133-152, February.
  15. Allan M Feldman & Roberto Serrano, 2007. "Arrow's Impossibility Theorem: Preference Diversity in a Single-Profile World," Working Papers 2007-12, Brown University, Department of Economics.
  16. Enrique Sentana, 2009. "The econometrics of mean-variance efficiency tests: a survey," Econometrics Journal, Royal Economic Society, vol. 12(3), pages C65-C101, November.
  17. David Martinez-Miera & Rafael Repullo, 2010. "Does Competition Reduce the Risk of Bank Failure?," Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3638-3664, October.
  18. Enrique Sentana & Gabriele Fiorentini, 2007. "On The Efficiency And Consistency Of Likelihood Estimation In Multivariate Conditionally Heteroskedastic Dynamic Regression Models," Working Papers wp2007_0713, CEMFI.
  19. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  20. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
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