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Fiduciary Duties and Equity-Debtholder Conflicts

Becker, Bo - 2011

We use an important legal event as a natural experiment to examine the effect of management fiduciary duties on equity-debt conflicts. A 1991 Delaware bankruptcy ruling changed the nature of corporate directors' fiduciary duties in firms incorporated in that state. This change limited managers'...

Persistent link: https://www.econbiz.de/10013117403

Should Derivatives Be Privileged in Bankruptcy?

Bolton, Patrick - 2011

Derivative contracts, swaps, and repos enjoy "super-senior" status in bankruptcy: they are exempt from the automatic stay on debt and collateral collection that applies to virtually all other claims. We propose a simple corporate finance model to assess the effect of this exemption on firms'...

Persistent link: https://www.econbiz.de/10013118249

Rollover Risk and Credit Risk

He, Zhiguo - 2010

market liquidity and shorter debt maturity can exacerbate this externality and cause costly firm bankruptcy at higher … fundamental thresholds. Our model provides implications on liquidity-spillover effects, the flight-to-quality phenomenon, and …

Persistent link: https://www.econbiz.de/10013148863

Liaisons Dangereuses : Increasing Connectivity, Risk Sharing, and Systemic Risk

Battiston, Stefano - 2010

We characterize the evolution over time of a network of credit relations among financial agents as a system of coupled stochastic processes. Each process describes the dynamics of individual financial robustness, while the coupling results from a network of liabilities among agents. The average...

Persistent link: https://www.econbiz.de/10013149415

Creditor Rights and Corporate Risk-Taking

Acharya, Viral V. - 2010

We analyze the link between creditor rights and firms' investment policies, proposing that stronger creditor rights in bankruptcy reduce corporate risk-taking. In cross-country analysis, we find that stronger creditor rights induce greater propensity of firms to engage in diversifying...

Persistent link: https://www.econbiz.de/10013149976

Bailouts, the Incentive to Manage Risk, and Financial Crises

Panageas, Stavros - 2010

A firm's termination leads to bankruptcy costs. This may create an incentive for outside stakeholders or the firm's debtholders to bail out the firm as bankruptcy looms. Because of this implicit guarantee, firm shareholders have an incentive to increase volatility in order to exploit the...

Persistent link: https://www.econbiz.de/10013152555

Predatory Trading

Pedersen, Lasse Heje - 2004

overshooting and a reduced liquidation value for the distressed trader. Hence, the market is illiquid when liquidity is most needed …

Persistent link: https://www.econbiz.de/10012785459

Trade Creditors’ Information Advantage

Ivashina, Victoria - 2018

Using information on the sales of debt claims for 132 U.S. Chapter 11 bankruptcy cases, we show that large trade creditors' decisions to sell receivables of a distressed company in bankruptcy are predictive of lower recovery rates, and that in such cases these creditors sell ahead of less...

Persistent link: https://www.econbiz.de/10012928983

Firms, Failures, and Fluctuations : The Macroeconomics of Supply Chain Disruptions

Acemoglu, Daron; Tahbaz-Salehi, Alireza - 2022

This paper studies how firm failures and the resulting disruptions to supply chains can amplify negative shocks. We develop a non-competitive model where customized supplier-customer relations increase productivity, and the relationship-specific surplus generated between firms and their...

Persistent link: https://www.econbiz.de/10013291552

Aggregate Risk and the Choice between Cash and Lines of Credit

Acharya, Viral V. - 2010

We argue that a firm's aggregate risk is a key determinant of whether it manages its future liquidity needs through … cash reserves or bank lines of credit. Banks create liquidity for firms by pooling their idiosyncratic risks. As a result … opportunity costs and liquidity premium. We verify our model's hypothesis empirically by showing that firms with high asset beta …

Persistent link: https://www.econbiz.de/10013141860