We develop a unified model of mortgage and servicer contracts. Renegotiating mortgage contracts following default is strictly Pareto improving, if the lender gathers updated information. An incentive compatible servicer contract requires the servicer to hold a risk position that has a value...

Hedge fund activists transfer relevant prior work experience to their activism campaigns. Categorizing activists based on past employment at investment banks (generalists), private equity or special situations partnerships (specialists), or other firms (non-financial experts), we relate...

This paper reviews empirical research on the use of private and court-supervised mechanisms for resolving default and reorganizing companies in financial distress. Starting with a simple framework for financial distress and a quick overview of the theoretical research in this area, we proceed to...

This paper examines the relationship between investment bank participation in public debt exchange offers by financially distressed firms and the composition of the offer. Investment banks negotiate with bondholders on behalf of the firm, act as dealer manager for the exchange, promote the...

A number of proposals for reforming Chapter 11 suggest that a mandatory cash auction of the bankrupt firm would lead to more efficient investment outcomes than a reorganization based system. However, recent empirical work describing reorganizations in European countries which mandate the sale of...

This paper provides empirical evidence that takeovers can facilitate the efficient redeployment of assets of bankrupt firms. We investigate two questions central to the debate over acquisitions of bankrupt companies based on a sample of 55 firms acquired in Chapter 11. First, we examine whether...

This paper investigates the role of external agents, known as vulture investors, in the governance and reorganization of a sample of 288 firms which default on their public debt. Vultures are frequently active on boards and in the management of target companies, and gain control of 16% of the...

Recently, the mainstream media have paid considerable attention to hedge funds behaving as agents of corporate change. We study this phenomenon using a unique dataset of hedge fund activism for the period 1994-2005, and find evidence that hedge fund activists improve both short-term stock...

To avoid Chapter 11 bankruptcy, financially distressed firms often undertake out-of-court restructurings, which take the form of exchange offers for firms with public debt outstanding. We examine the choice between potentially lower cost and faster offers of unregistered securities under Section...