We develop a small open economy macroeconomic model where financial conditions influence aggregate behavior. We use this model to explore the connection between the exchange rate regime and financial distress. Fixed exchange rates are shown to exacerbate financial crises. Quantitative exercises...

This paper examines the process of distress selling and asset market feedback. It splits this process into several stages, in order to analyse what triggers distress selling, why asset prices fall, and how falling prices generate additional rounds of selling. This framework enables us to...

Since Modigliani and Miller (1958,1963), the relationship between debt and value still remains an open question. The numerous contributions of US research seem to show that the relationship between debt, performance and value is complex. The influence of debt on performance is affected by many...

CONSUMER CREDIT IN ITALY: WELL-BEING OR FINANCIAL FRAGILITY?Demand for consumer credit on the part of Italian households has risen sharply in recent years. According to the economic reference models for analysis of the choices made by households in terms of consumption, saving and indebtedness,...

The purpose of this paper is to investigate whether or not firms that are taken into the surveillance market in Istanbul Stock Exchange are experiencing financial distress. The surveillance firms present irregular behaviors and have difficulty complying with current regulation. It can be...

The study examines main determinants of financial distress of companies in Poland during the recent transformation period. The data compose a sample of 1995-97 annual financial statements of 200 unlisted companies in Poland. The sample was collected by the Institute of Economics of the Polish...

This paper proposes a model of how agents adjust their asset holdings in response to losses in general equilibrium. By emphasising the relation between deflation and financial distress, we capture some original features of the early debt-deflation literature, such as distress selling,...

Abstract Mandatory convertibles, which are equity-linked hybrid securities that automatically convert to common stock on a pre-specified date, have become an increasingly popular means of raising capital in recent years (about $20 billion worth issued in 2001 alone). This paper presents the...

This paper studies the design and valuation of debt contracts in a general dynamic setting under uncertainty. By incorporating some insights of the recent corporate finance literature into a valuation framework, we obtain a model which seems promising for the empirical study of pricing of risky...

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...