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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 Moral-Benito, 2010. "Determinants of economic growth: A Bayesian panel data approach," Working Papers 1031, Banco de España;Working Papers Homepage.
  3. Robert J. Aumann & Roberto Serrano, 2007. "An Economic Index of Riskiness," Levine's Bibliography 321307000000000836, UCLA Department of Economics.
  4. 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.
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  7. Pedro Mira & Victor Aguirregabiria, 2007. "Dynamic Discrete Choice Structural Models: A Survey," Working Papers wp2007_0711, CEMFI.
  8. Roberto Serrano & Antonio Cabrales, 2007. "Implementation in Adaptive Better-Response Dynamics," Working Papers 2007-10, Brown University, Department of Economics.
  9. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F., 2008. "Does immigration affect the Phillips curve? Some evidence for Spain," European Economic Review, Elsevier, vol. 52(8), pages 1398-1423, November.
  10. Roberto Serrano & Allan M. Feldman, 2007. "Arrow’S Impossibility Theorem: Preference Diversity In A Single-Profile World," Working Papers wp2007_0710, CEMFI.
  11. 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.
  12. Roberto Serrano, 2007. "Cooperative Games: Core and Shapley Value," Working Papers 2007-11, Brown University, Department of Economics.
  13. Repullo, Rafael & Suarez, Javier, 2008. "The Procyclical Effects of Basel II," CEPR Discussion Papers 6862, C.E.P.R. Discussion Papers.
  14. 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.
  15. Roberto Serrano & Rene Saran, 2007. "The Evolution Of Bidding Behavior In Private-Values Auctions And Double Auctions," Working Papers wp2007_0712, CEMFI.
  16. 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.
  17. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  18. Enrique Sentana, 2009. "The econometrics of mean-variance efficiency tests: a survey," Econometrics Journal, Royal Economic Society, vol. 12(3), pages C65-C101, November.
  19. Amengual, Dante & Sentana, Enrique, 2010. "A comparison of mean-variance efficiency tests," Journal of Econometrics, Elsevier, vol. 154(1), pages 16-34, January.
  20. Max Bruche, 2009. "Bankruptcy Codes, Liquidation Timing, And Debt Valuation," Working Papers wp2009_0902, CEMFI.
  21. Mendez, Ildefonso, 2008. "Promoting Permanent Employment: Lessons from Spain," MPRA Paper 7933, University Library of Munich, Germany.
  22. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
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