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Bankruptcy Codes, Liquidation Timing, and Debt Valuation

Listed author(s):
  • 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
Handle: RePEc:cmf:wpaper:wp2009_0902
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  2. Moral-Benito, Enrique, 2009. "Determinants of Economic Growth: A Bayesian Panel Data Approach," Policy Research Working Paper Series 4830, The World Bank.
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  13. Robert J. Aumann & Roberto Serrano, 2006. "An Economic Index of Riskiness," Working Papers 2006-20, Brown University, Department of Economics.
  14. 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 144-174, August.
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  16. Amengual, Dante & Sentana, Enrique, 2010. "A comparison of mean-variance efficiency tests," Journal of Econometrics, Elsevier, vol. 154(1), pages 16-34, January.
  17. repec:cmf:wpaper:wp2007_0716 is not listed on IDEAS
  18. repec:cmf:wpaper:wp2008_0801 is not listed on IDEAS
  19. repec:cmf:wpaper:wp2007_0713 is not listed on IDEAS
  20. repec:cmf:wpaper:wp2008_0809 is not listed on IDEAS
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  22. Enrique Sentana, 2009. "The econometrics of mean-variance efficiency tests: a survey," Econometrics Journal, Royal Economic Society, vol. 12(3), pages 65-101, November.
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