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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. Laura Hospido, 2007. "Modelling heterogeneity and dynamics in the volatility of individual wages," Banco de Espa�a Working Papers 0738, Banco de Espa�a.
  2. Robert J. Aumann & Roberto Serrano, 2006. "An Economic Index of Riskiness," Working Papers 2006-20, Brown University, Department of Economics.
  3. Antonio Cabrales & Roberto Serrano, 2007. "Implementation in adaptive better-response dynamics," Working Papers 2007-16, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  4. Enrique Sentana, 2009. "The econometrics of mean-variance efficiency tests: a survey," Econometrics Journal, Royal Economic Society, vol. 12(3), pages C65-C101, November.
  5. Bruche, Max & Suarez, Javier, 2009. "The Macroeconomics of Money Market Freezes," CEPR Discussion Papers 7304, C.E.P.R. Discussion Papers.
  6. Enrique Sentana & Javier Mencía, 2008. "Distributional Tests In Multivariate Dynamic Models With Normal And Student T Innovations," Working Papers wp2008_0804, CEMFI.
  7. Enrique Sentana & Dante Amegual, 2008. "A Comparison Of Mean-Variance Efficiency Tests," Working Papers wp2008_0806, CEMFI.
  8. Enrique Moral-Benito, 2007. "Determinants Of Economic Growth: A Bayesian Panel Data Approach," Working Papers wp2007_0719, CEMFI.
  9. 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.
  10. Samuel Bentolila & Juan J. Dolado & Juan F. Jimeno, 2007. "Does Immigration Affect the Phillips Curve? Some Evidence for Spain," Kiel Working Papers 1333, Kiel Institute for the World Economy.
  11. Rafael Repullo & David Martínez-Miera, 2008. "Does Competition Reduce The Risk Of Bank Failure?," Working Papers wp2008_0801, CEMFI.
  12. 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.
  13. Gagliarducci, Stefano & Nannicini, Tommaso & Naticchioni, Paolo, 2008. "Electoral Rules and Politicians’ Behavior: A Micro Test," IZA Discussion Papers 3348, Institute for the Study of Labor (IZA).
  14. Roberto Serrano, 2007. "Cooperative Games: Core and Shapley Value," Working Papers 2007-11, Brown University, Department of Economics.
  15. Aguirregabiria, Victor & Mira, Pedro, 2010. "Dynamic discrete choice structural models: A survey," Journal of Econometrics, Elsevier, vol. 156(1), pages 38-67, May.
  16. Repullo, Rafael & Suarez, Javier, 2008. "The Procyclical Effects of Basel II," CEPR Discussion Papers 6862, C.E.P.R. Discussion Papers.
  17. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  18. Miller, Merton H, 1977. "Debt and Taxes," Journal of Finance, American Finance Association, vol. 32(2), pages 261-75, May.
  19. 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.
  20. Roberto Serrano & Allan M. Feldman, 2007. "Arrow’S Impossibility Theorem: Preference Diversity In A Single-Profile World," Working Papers wp2007_0710, CEMFI.
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