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A dialogue on the costs and benefits of automatic stays for derivatives and repurchase agreements
Duffie, Darrell; Skeel, David - 2012 - Last rev.: March 04, 2012
For nearly two years, the two of us have had a running discussion of the costs and benefits of automatic stays in bankruptcy for qualified financial contracts (QFCs) such as derivatives and repurchase agreements, particularly those held by systemically important major dealer banks. Under current...
Persistent link: https://www.econbiz.de/10009504439
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Corporate failure and the business cycle : measuring systematic risk
Ogneva, Maria; Piotroski, Joseph D.; Zakolyukina, … - 2016
In this paper, we use accounting fundamentals to measure systematic risk of distress. Our main testable prediction—that this risk increases with the probability of recessionary failure, P(R|F)—is based on a stylized model that guides our empirical analyses. We first apply the lasso method to...
Persistent link: https://www.econbiz.de/10011524470
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Cash holdings and credit risk
Acharya, Viral V.; Davydenko, Sergei A.; Strebulaev, Ilya A. - 2012
Intuition suggests that firms with higher cash holdings should be 'safer' and have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive. This puzzling finding can be explained by the precautionary motive for saving cash, which in our model causes...
Persistent link: https://www.econbiz.de/10010206259
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The bank as grim reaper : debt composition and bankruptcy thresholds
Carey, Mark S.; Gordy, Michael B. - 2016
We offer a model and evidence that private debtholders play a key role in setting the endogenous asset value threshold below which corporations declare bankruptcy. The model, in the spirit of Black and Cox (1976), implies that the recovery rate at emergence from bankruptcy on all of the firm's...
Persistent link: https://www.econbiz.de/10011578370
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Confronting the zombies : policies for productivity revival
Andrews, Dan; McGowan, Muge Adalet; Millot, Valentine - 2017
much scope to improve the design of insolvency regimes in order to reduce the barriers to restructuring of weak firms and … the personal costs associated with entrepreneurial failure. Insolvency regime reform can not only address the … markets. As the zombie firm problem may partly stem from bank forbearance, complementary reforms to insolvency regimes are …
Persistent link: https://www.econbiz.de/10011779088
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Second liens and the holdup problem in mortgage renegotiation
Agarwal, Sumit; Amromin, Gene; Ben-David, Itzhak; … - 2014
When borrowers are delinquent, senior debtholders prefer liquidation whereas junior debtholders prefer to maintain their option value by delaying resolution or modifying the loan. In the mortgage market, a conflict of interest (“holdup”) arises when servicers of securitized senior liens are...
Persistent link: https://www.econbiz.de/10010353293
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Default prediction around the world : the effect of constraints on pessimistic trading
Maffett, Mark; Owens, Edward; Srinivasan, Anand - 2013
We examine how equity-market frictions that restrict pessimistic trading, such as short-sale constraints, affect assessments of default risk. We find that these frictions decrease the usefulness of equity-market variables for identifying defaulting firms but increase their usefulness for...
Persistent link: https://www.econbiz.de/10010250688
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The dynamics of adjustable-rate subprime mortgage default : a structural estimation
Fang, Hanming; Kim, You Suk; Li, Wenli - 2015
We present a dynamic structural model of subprime adjustable-rate mortgage (ARM) borrowers making payment decisions taking into account possible consequences of different degrees of delinquency from their lenders. We empirically implement the model using unique data sets that contain information...
Persistent link: https://www.econbiz.de/10011499436
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Moving towards a more dynamic business sector in Spain
González Pandiella, Alberto - 2014
be relieved. This would be facilitated by more efficient insolvency procedures and further development of non …
Persistent link: https://www.econbiz.de/10010464863
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A market-based study of the cost of default
Davydenko, Sergei A.; Strebulaev, Ilya A.; Zhao, Xiaofei - 2012
Although the cost of financial distress is a central issue in capital structure and credit risk studies, reliable estimates of its size are difficult to come by. This paper proposes a novel method of extracting the cost of default from the change in the market value of a firm's assets upon...
Persistent link: https://www.econbiz.de/10010206258