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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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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. Bruche, Max & Suarez, Javier, 2009. "The Macroeconomics of Money Market Freezes," CEPR Discussion Papers 7304, C.E.P.R. Discussion Papers.
  2. Enrique Sentana, 2008. "The Econometrics Of Mean-Variance Efficiency Tests: A Survey," Working Papers wp2008_0807, CEMFI.
  3. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2007. "Does Immigration Affect The Phillips Curve? Some Evidence For Spain," Working Papers wp2007_0718, CEMFI.
  4. Javier Mencía & Enrique Sentana, 2009. "Multivariate location-scale mixtures of normals and mean-variance-skewness portfolio allocation," Banco de Espa�a Working Papers 0909, Banco de Espa�a.
  5. Robert J. Aumann & Roberto Serrano, 2007. "An Economic Index of Riskiness," Levine's Bibliography 321307000000000836, UCLA Department of Economics.
  6. Max Bruche, 2009. "Bankruptcy Codes, Liquidation Timing, And Debt Valuation," Working Papers wp2009_0902, CEMFI.
  7. 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.
  8. Martinez-Miera, David & Repullo, Rafael, 2008. "Does Competition Reduce the Risk of Bank Failure?," CEPR Discussion Papers 6669, C.E.P.R. Discussion Papers.
  9. Rene Saran & Roberto Serrano, 2007. "The evolution of bidding behavior in private-values auctions and double auctions," Working Papers 2007-10, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  10. Javier Mencía & Enrique Sentana, 2009. "Distributional tests in multivariate dynamic models with Normal and Student t innovations," Banco de Espa�a Working Papers 0929, Banco de Espa�a.
  11. Enrique Moral-Benito, 2010. "Determinants of economic growth: A Bayesian panel data approach," Banco de Espa�a Working Papers 1031, Banco de Espa�a.
  12. 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.
  13. Repullo, Rafael & Suarez, Javier, 2008. "The Procyclical Effects of Basel II," CEPR Discussion Papers 6862, C.E.P.R. Discussion Papers.
  14. Roberto Serrano, 2007. "Cooperative Games: Core And Shapley Value," Working Papers wp2007_0709, CEMFI.
  15. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  16. Pedro Mira & Victor Aguirregabiria, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers wp2007_0711, CEMFI.
  17. Gabriele Fiorentini & Enrique Sentana, 2007. "On the efficiency and consistency of likelihood estimation in multivariate conditionally heteroskedastic dynamic regression models," Working Paper Series 38-07, The Rimini Centre for Economic Analysis, revised Jul 2007.
  18. Antonio Cabrales & Roberto Serrano, 2007. "Implementation in Adaptive Better-Response Dynamics," Economics Working Papers we075731, Universidad Carlos III, Departamento de Economía.
  19. Hospido, Laura, 2010. "Modelling Heterogeneity and Dynamics in the Volatility of Individual Wages," IZA Discussion Papers 4712, Institute for the Study of Labor (IZA).
  20. Enrique Sentana & Dante Amegual, 2008. "A Comparison Of Mean-Variance Efficiency Tests," Working Papers wp2008_0806, CEMFI.
  21. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
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