In a market-based financial system, credit is held by dispersed creditors, and out-of-court renegotiation of debt is more likely to fail because of hold-out problems; in a bank-based system, out-of-court renegotiation stands good chances to succeed. Since out-of-court renegotiation is a...

Within the context of expected utility and in a discrete loss setting, we provide a complete account of the demand for insurance by strictly-risk averse agents and risk-neutral firms when they enjoy limited liability. When exposed to a bankrupting, binary loss and under actuarially fair prices,...

The determinants of transitions between different states of financial distress are analyzed using two versions of Markov chain models: a multinomial logit model without random effects and a multinomial logit model capturing such unobservable factors. The empirical analysis is based on a panel...

The decision of whether a firm should voluntarily liquidate, rather than continue trading, is a function of many parameters including uncertain future earnings, asset depreciation, and the firm's cost-of-debt. We develop an equity valuation model derived from the fundamental accounting equation...

During times of distress, companies are compelled to reassess operational policies and reengineer strategic formulations to discern value maximising uses for limited resources. The executive's agility to react to financial distress determines the probability of bankruptcy. Proper governance...

This paper examines how consumers react to the financial distress of durable goods manufacturers by looking at the Swedish new car market. We employ a difference-in-differences matching methodology whereby we compare sales of carmaker Saab with those of a carefully constructed control group of...

Motivated by the risk of stopped debt coupon payments from a leveraged company in financial distress, we value a level dependent annuity contract where the annuity rate depends on the value of an underlying asset-process. The range of possible values of the asset is divided into a finite number...

This article examines the interaction between the restructuring process of a financially distressed firm and the behavior of its manager. We analyze a situation in which a bank decides to offer a renegotiation to a distressed firm, yet the manager is reluctant to implement a restructuring even...

We examine the impact of the COVID-19 economic crisis on business and consumer bankruptcies in the United States using real-time data on the universe of filings. Historically, bankruptcies have closely tracked the business cycle and contemporaneous unemployment rates. However, this relationship...