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Insolvency of Significant Non-Financial Enterprises : Lessons from Bank Failures and Bank Resolution

Kokorin, Ilya - 2020

seek to preserve financial stability and ensure continuity of critical functions. The same cannot be said of insolvency …, insolvency law has largely remained microprudential and reactive.Admittedly, unlike bank failures, corporate insolvencies usually … trigger contagion and cause disruptive consequences. Insofar as insolvency of SNFEs raises concerns common to bank failures …

Persistent link: https://www.econbiz.de/10012833155

Machine Learning for Zombie Hunting. Firms' Failures and Financial Constraints

Bargagli Stoffi, Falco - 2020

In this contribution, we exploit machine learning techniques to predict the risk of failure of firms. Then, we propose an empirical definition of zombies as firms that persist in a status of high risk, beyond the highest decile, after which we observe that the chances to transit to lower risk...

Persistent link: https://www.econbiz.de/10012835532

Financial Distress and the Cost of Labor : Evidence from a Natural Experiment

Pedersen, David - 2020

Employees bear significant costs in bankruptcy. Theoretical models predict they will accept lower wages in the face of financial distress to avoid such costs. Using a natural experiment, I test this theory and find an exogenous increase in default risk causes a decrease in employee wages. The...

Persistent link: https://www.econbiz.de/10012837496

How large are Pre-Default Costs of Financial Distress? Estimates from a Dynamic Model

Elkamhi, Redouane - 2020

We estimate the costs of financial distress prior to default (pre-default costs) separately from the loss incurred at default (the loss given default) using a dynamic trade-off model of capital structure. We document that pre-default costs are on average equal to 6.5% of firm value per year. We...

Persistent link: https://www.econbiz.de/10012839730

Investment Sensitivity to Lender Default Shocks

Celil, Hursit - 2020

We investigate how idiosyncratic lender shocks impact corporate investment. Lenders with recent default experience write stricter loan contracts, leading to a reduction in real investment for borrowing firms. The decline in investment is not attributable to loan riskiness, borrower's agency...

Persistent link: https://www.econbiz.de/10012839813

Bankruptcy Risk Among Indonesian Stock Exchange Listed Companies

Setiawan, Anton - 2020

Objective - This research analyses whether there was a change in bankruptcy risk of companies in Indonesia for the period between 2015–2018, during the first presidency period of Joko Widodo, when Indonesia experienced tremendous dynamic economic, political and technological change. Previous...

Persistent link: https://www.econbiz.de/10012842095

Stressed Distance to Default and Default Risk

Guo, Nan - 2020

Distance to default (DTD) is a strong predictor of default risk derived from structural models. This paper specifies a stressed version of DTD ("stressed DTD'') to measure time-varying corporate default risk in the event that a systematic stress scenario occurs. Compared with the ordinary DTD,...

Persistent link: https://www.econbiz.de/10012842858

Forecasting Bankruptcy : An European Analysis

Arzu, Daniela - 2017

Several studies investigated the predictability of financial distress. With this paper, we analyse the ability of Integrated Rating model to anticipate potential corporate crisis. In particular, we study bankrupt companies of four European Countries (Czech Republic, Spain, Italy, France,...

Persistent link: https://www.econbiz.de/10012956057

Derivatives Supply and Corporate Hedging : Evidence from the Safe Harbor Reform of 2005

Giambona, Erasmo - 2019

This article analyzes the importance of supply-side fluctuations for corporate hedging. To establish a causal link, we exploit a regulatory change that allows derivatives counterparties to circumvent the Bankruptcy Code's automatic stay: the Safe Harbor Reform of 2005. Following the...

Persistent link: https://www.econbiz.de/10012900744

The Dark Side of 2005 Bankruptcy Code Reform —Does Derivatives Privilege Affect Corporate Borrowing?

Hu, Maggie - 2019

The 2005 Bankruptcy Reform puts derivatives contracts into an effective “super-senior” status. It is intended to provide stability to the derivative markets and reduce systemic risk, however, we find that it has negative impact on derivative-using firms' borrowings. The theoretical model in...

Persistent link: https://www.econbiz.de/10012901134