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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
Date of revision:
Handle: RePEc:cmf:wpaper:wp2009_0902
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  1. 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.
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  3. Cabrales, Antonio & Serrano, Roberto, 2007. "Implementation in adaptive better-response dynamics," UC3M Working papers. Economics we075731, Universidad Carlos III de Madrid. Departamento de Economía.
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  8. Bentolila, Samuel & Dolado, Juan J. & Jimeno, Juan F, 2007. "Does Immigration Affect the Phillips Curve? Some Evidence for Spain," CEPR Discussion Papers 6604, C.E.P.R. Discussion Papers.
  9. 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.
  10. Enrique Sentana & Javier Mencía, 2008. "Distributional Tests In Multivariate Dynamic Models With Normal And Student T Innovations," Working Papers wp2008_0804, CEMFI.
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  12. Robert J. Aumann & Roberto Serrano, 2007. "An Economic Index of Riskiness," Levine's Bibliography 321307000000000836, UCLA Department of Economics.
  13. Mendez, Ildefonso, 2008. "Promoting Permanent Employment: Lessons from Spain," MPRA Paper 7933, University Library of Munich, Germany.
  14. 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.
  15. Enrique Sentana, 2009. "The econometrics of mean-variance efficiency tests: a survey," Econometrics Journal, Royal Economic Society, vol. 12(3), pages C65-C101, November.
  16. Gerard Llobet & Anna Layne-Farrar & A. Jorge Padilla, 2008. "Are Joint Negotiations In Standard Stting "Reasonably Necessary"?," Working Papers wp2008_0808, CEMFI.
  17. Max Bruche & Javier Suarez, 2009. "The Macroeconomics Of Money Market Freezes," Working Papers wp2009_0901, CEMFI.
  18. Stefano Gagliarducci & Tommaso Nannicini & Paolo Naticchioni, 2007. "Electoral Rules And Politicians' Behavior: A Micro Test," Working Papers wp2007_0716, CEMFI.
  19. Enrique Sentana & Dante Amegual, 2008. "A Comparison Of Mean-Variance Efficiency Tests," Working Papers wp2008_0806, CEMFI.
  20. Roberto Serrano, 2007. "Cooperative Games: Core And Shapley Value," Working Papers wp2007_0709, CEMFI.
  21. 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.
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