monitoring is too costly, renegotiation leads to reorganization, which resembles actual bankruptcy practice. We calibrate the …-trivial choice between alternative bankruptcy procedures. Given limited commitment and asymmetric information, financial contracts … specify default, renegotiation and reorganization policies. Renegotiation entails a redistribution of social surplus, while …

Using data from financial reorganization plans filed by insolvent Canadian firms, we estimate the discount rate … implicit in theunsecured creditors' reorganization decision. Using (HARA) utility functions, we find the implicit monthly … discount rates used in previous empirical studies of reorganization. The discount rate estimates are robust to a range of …