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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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A Model of Mortgage Default
Campbell, John Y. - 2011
This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation...
Persistent link: https://www.econbiz.de/10013119572
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Firm Heterogeneity, Endogenous Entry, and the Business Cycle
Ottaviano, Gianmarco I.P. - 2011
This paper investigates the role that the entry and exit of heterogeneous firms plays in shaping aggregate fluctuations in economic activity. In so doing, it develops a dynamic stochastic general equilibrium model in which procyclical entry and countercyclical exit along a real business cycle...
Persistent link: https://www.econbiz.de/10013120283
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Are Corporate Default Probabilities Consistent with the Static Tradeoff Theory?
Hovakimian, Armen - 2011
Default probability plays a central role in the static tradeoff theory of capital structure. We directly test this … theory by regressing the probability of default on proxies for costs and benefits of debt. Contrary to predictions of the … theory, firms with higher bankruptcy costs, i.e., smaller firms and firms with lower asset tangibility, choose capital …
Persistent link: https://www.econbiz.de/10013121593
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Cash Holdings and Credit Risk
Acharya, Viral V. - 2011
Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for...
Persistent link: https://www.econbiz.de/10013125920
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Bankruptcy Spillovers
Bernstein, Shai - 2017
How do different bankruptcy approaches affect the local economy? Using U.S. Census microdata at the establishment level, we explore the spillover effects of reorganization and liquidation on geographically proximate firms. We exploit the random assignment of bankruptcy judges as a source of...
Persistent link: https://www.econbiz.de/10012963165
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Dynamic Debt Maturity
He, Zhiguo - 2016
A firm chooses its debt maturity structure and default timing dynamically, both without commitment. Via the fraction of newly issued short-term bonds, equity holders control the maturity structure, which affects their endogenous default decision. A shortening equilibrium with accelerated default...
Persistent link: https://www.econbiz.de/10013000527
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Insolvency Resolution and the Missing High Yield Bond Markets
Becker, Bo - 2013
-country and using insolvency reforms as natural experiments. Our empirical estimates suggest that a one …
Persistent link: https://www.econbiz.de/10013076562
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Optimal Taxation in the Presence of Bailouts
Panageas, Stavros - 2010
The termination of a representative financial firm due to excessive leverage may lead to substantial bankruptcy costs. A government in the tradition of Ramsey (1927) may be inclined to provide transfers to the firm so as to prevent its liquidation and the associated deadweight costs. It is shown...
Persistent link: https://www.econbiz.de/10013150643
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Bailouts, the Incentive to Manage Risk, and Financial Crises
Panageas, Stavros - 2010
A firm's termination leads to bankruptcy costs. This may create an incentive for outside stakeholders or the firm's debtholders to bail out the firm as bankruptcy looms. Because of this implicit guarantee, firm shareholders have an incentive to increase volatility in order to exploit the...
Persistent link: https://www.econbiz.de/10013152555