Dionne, Georges; Laajimi, Sadok - In: Journal of Empirical Finance 19 (2012) 3, pp. 395-408
. The effect of liquidity shortage is not well measured, nor is the effect of strategic default well identified. We use the … liquidity, asset volatility, and firm size. Three strategic default variables (liquidation costs, renegotiation frictions and … equity holders’ bargaining power) increase the implied default barrier level. This evidence supports strategic default models. …