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Costly External Finance, Liquidity Risk, and Default Risk
Yang, Jun - 2011
I use the 2007-2008 financial crisis to gauge how internal financial resources and external financial constraints mitigate or worsen the impact of the crisis on default risk of US industrial firms. I identify heterogeneity in short-term funding needs at the onset of the crisis by exploiting...
Persistent link: https://www.econbiz.de/10013128496
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Debt Renegotiation
Moraux, Franck - 2012
This paper develops a new model of debt renegotiation in a structural framework, that accounts for both taxes and bankruptcy costs. We investigate situations where the manager can optimally (on behalf of the equity holder) impose a permanent coupon reduction to creditors, given that the new...
Persistent link: https://www.econbiz.de/10013105032
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Debt Structure When Bankruptcy Law Offers Incentives to Restructure
Hasan, Iftekhar - 2019
We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm's leverage policy. We show that the two indexes have at most a...
Persistent link: https://www.econbiz.de/10012903408
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Rollover Risk and the Dynamics of Debt
Chaderina, Maria - 2018
I study how firms adjust leverage, maturity and cash to manage rollover risk, and show that time-variation in concentration of maturity dates arises endogenously. To avoid rollover risk, firms prefer long-term debt with dispersed maturity dates. However, severe negative shocks force firms to...
Persistent link: https://www.econbiz.de/10012937647
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Leveraged Buyouts and Financial Distress
Ayash, Brian - 2019
Do leveraged buyout transactions increase the chance of bankruptcy? While corporate finance theory predicts that such sharp changes in capital structure increase financial distress costs by raising the probability of bankruptcy for each company, previous studies seem to fail to find any...
Persistent link: https://www.econbiz.de/10012866191
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Debt and Insolvency
Heaton, J.B. - 2020
about the design of debt contracts. The results derive from the premise that firms must avoid legal insolvency when issuing … new debt because insolvency at issuance would trigger severe operational limitations on the issuer. I first show that … legal insolvency limits debt capacity, limiting the amount of money that a firm can raise with debt. I next show that legal …
Persistent link: https://www.econbiz.de/10012852105
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Private Equity and the Resolution of Financial Distress
Hotchkiss, Edith S. - 2020
We examine the role private equity (PE) firms play in the resolution of financial distress using a sample of 2,151 firms that borrow in the leveraged loan market between 1997 and 2010. Controlling for leverage, PE-backed firms are no more likely to default than other leveraged loan borrowers....
Persistent link: https://www.econbiz.de/10012857451
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Creditor Rights, Corporate Leverage and Investments, and the Firm Type
Canipek, Aras; Kind, Axel H.; Wende, Sabine - 2021
Stronger creditor rights reduce credit costs and thus may allow firms to increase leverage and investments, but also increase distress costs and thus may prompt firms to lower leverage and undertake risk-reducing but unprofitable investments. Using a German bankruptcy law reform, on average, we...
Persistent link: https://www.econbiz.de/10013222495
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Equity Issuance of Distressed Firms
Park, James - 2015
Assuming benevolent managers, the debt-overhang problem suggests that distressed firms generally refrain from issuing equity. In contrast, agency theory predicts that distressed firm managers have strong self-interests to finance even deteriorating projects through equity issuance. This paper...
Persistent link: https://www.econbiz.de/10013038070
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Dynamic Debt Structure, Market Value of Firm, and Recovery Rate
Qi, Min - 2010
This paper examines the determinants of the outcomes of the default recovery process. We find that a new variable that incorporates not only the percentage of debt more senior to the debt instrument, but also debt at the same rank, is the most important factor driving the recovery rate. It is...
Persistent link: https://www.econbiz.de/10013147107