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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. 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.
  2. Bruche, Max & Suarez, Javier, 2009. "The Macroeconomics of Money Market Freezes," CEPR Discussion Papers 7304, C.E.P.R. Discussion Papers.
  3. Enrique Sentana & Javier Mencía, 2008. "Multivariate Location-Scale Mixtures Of Normals And Mean-Variance-Skwness Portfolio Allocation," Working Papers wp2008_0805, CEMFI.
  4. 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.
  5. Roberto Serrano, 2007. "Cooperative Games: Core and Shapley Value," Working Papers 2007-11, Brown University, Department of Economics.
  6. Aguirregabiria, Victor & Mira, Pedro, 2010. "Dynamic discrete choice structural models: A survey," Journal of Econometrics, Elsevier, vol. 156(1), pages 38-67, May.
  7. Enrique Moral-Benito, 2007. "Determinants Of Economic Growth: A Bayesian Panel Data Approach," Working Papers wp2007_0719, CEMFI.
  8. 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.
  9. Roberto Serrano & Robert J. Aumann, 2007. "An Economic Index Of Riskiness," Working Papers wp2007_0706, CEMFI.
  10. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  11. Ildefonso Mendez, 2013. "Promoting permanent employment: lessons from Spain," SERIEs, Spanish Economic Association, vol. 4(2), pages 175-199, June.
  12. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2007. "Does Immigration Affect the Phillips Curve? Some Evidence for Spain," IZA Discussion Papers 3249, Institute for the Study of Labor (IZA).
  13. 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.
  14. Rene Saran & Roberto Serrano, 2007. "The Evolution of Bidding Behavior in Private-Values Auction and Double Auctions," Working Papers 2007-01, Brown University, Department of Economics.
  15. Martinez-Miera, David & Repullo, Rafael, 2008. "Does Competition Reduce the Risk of Bank Failure?," CEPR Discussion Papers 6669, C.E.P.R. Discussion Papers.
  16. 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.
  17. Roberto Serrano & Antonio Cabrales, 2007. "Implemetation In Adaptive Better-Response Dynamics," Working Papers wp2007_0708, CEMFI.
  18. Enrique Sentana, 2008. "The Econometrics Of Mean-Variance Efficiency Tests: A Survey," Working Papers wp2008_0807, CEMFI.
  19. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  20. Amengual, Dante & Sentana, Enrique, 2010. "A comparison of mean-variance efficiency tests," Journal of Econometrics, Elsevier, vol. 154(1), pages 16-34, January.
  21. Rafael Repullo & Javier Suarez, 2008. "The Procyclical Effects Of Basel Ii," Working Papers wp2008_0809, CEMFI.
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