We provide the first empirical analysis on the effects of credit default swaps (CDS) on corporate distress resolution with a focus on debt recovery rate. CDS contracts are settled shortly after the occurrence of credit events such as restructuring or bankruptcy filings and, presumably, should...

Bankruptcy costs depend not only on the laws that govern financial distress but also on the ability of the court to rehabilitate distressed firms. This paper tests whether Chapter 11 restructuring outcomes are affected by time constraints in busy bankruptcy courts. Using the passage of the...

Using a dynamic model of strategic bargaining between equity and debt holders following default, we analyze the impact of shareholder bargaining power on the investment effects of debt overhang. Our empirical tests utilize a new measure of debt overhang wedge based on default probabilities...

We examine how access to bank credit affects trade credit in the supplier-customer relationships of U.S. public firms. For identification, we use exogenous liquidity shocks to supplier firms in the form of staggered changes to interstate bank branching laws. Using a variety of tests, we show...

Hedge funds are heavily involved in corporate restructurings. What makes their involvement distinct from other investors is that hedge funds can trade across the securities of a firm, holding either long or short positions in each security. We analyze the choice of a restructuring proposal by a...

This essay surveys important contributions to the economics of bankruptcy. It is an introductory chapter for a forthcoming volume (from Edward Elgar Press) that compiles the work of legal scholars as well as economists working in the field of corporate finance. The essay begins with the...

The "Centre of Main Interests" ("COMI") is one of the most relevant concepts in the international insolvency scene. It is used as the main criterion to assign jurisdiction in cross border insolvency cases in the vast majority of the European countries, the United States and every state that has...

Reviews on financial distress prediction models indicate that these techniques give highly reliable estimates of probabilities of default (PDs) and loss given default (LGD) only for relatively short horizons, rarely beyond two years. Major stakeholders, e.g. investors and bank risk and capital...

On the eve of the financial crisis, a series of Delaware court decisions added up to a radical change in law: Creditors would no longer have the kind of common law protections from opportunism that helped protect their bargain for the better part of two centuries. In this Article, we argue that...

Using hand-collected data on financial asset portfolios, we investigate corporate risk-taking through risky financial investments. We find that distressed firms with large short-term liabilities substantially increase their investments in risky financial assets, including corporate debt, equity,...