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Market Timing, Investment, and Risk Management
Bolton, Patrick - 2011
Firms face uncertain financing conditions and are exposed to the risk of a sudden rise in financing costs during … issuance, risk management, and payout policies) for a financially constrained firm facing time-varying external financing costs … financing opportunities also induce firms to rationally time the equity market, even if they have no immediate needs for cash …
Persistent link: https://www.econbiz.de/10013129213
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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, firms with high aggregate risk find it costly to get...
Persistent link: https://www.econbiz.de/10013141860
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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
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Rollover Risk and Credit Risk
He, Zhiguo - 2010
This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the firm faces losses in rolling over its maturing debt, its equity holders are willing to absorb the losses only if the option value of keeping the firm alive justifies the cost of...
Persistent link: https://www.econbiz.de/10013148863
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The Risk-Adjusted Cost of Financial Distress
Almeida, Heitor - 2010
In this paper we argue that risk-adjustment matters for the valuation of financial distress costs, since financial distress is more likely to happen in bad times. Systematic distress risk implies that the risk-adjusted probability of financial distress is larger than the historical probability....
Persistent link: https://www.econbiz.de/10012761946
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A Note on Liquidity Risk Management
Brunnermeier, Markus Konrad - 2010
When a firm is unable to roll over its debt, it may have to seek more expensive sources of financing or even liquidate …. An advantage of short-term financing is that a firm, while in good financial health, can readjust its maturity structure …
Persistent link: https://www.econbiz.de/10012757874
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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
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Risk Sharing Externalities
Bocola, Luigi; Lorenzoni, Guido - 2022
Financial crises typically arise because firms and financial institutions choose balance sheets that expose them to aggregate risk. We propose a theory to explain these risk exposures. We study a financial accelerator model where entrepreneurs can issue state-contingent claims to consumers. Even...
Persistent link: https://www.econbiz.de/10013295840
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A Unified Theory of Tobin's Q, Corporate Investment, Financing, and Risk Management
Bolton, Patrick; Chen, Hui; Wang, Neng - 2022
investment and financing decisions. In our model, corporate risk management involves internal liquidity management, financial … external cost of financing; 3) the firm's liquidation value; 4) the opportunity cost of holding cash; 5) investment adjustment …
Persistent link: https://www.econbiz.de/10014209333
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When Credit Bites Back : Leverage, Business Cycles, and Crises
Jordà, Òscar - 2011
This paper studies the role of credit in the business cycle, with a focus on private credit overhang. Based on a study of the universe of over 200 recession episodes in 14 advanced countries between 1870 and 2008, we document two key facts of the modern business cycle: financial-crisis...
Persistent link: https://www.econbiz.de/10013118125