Contractual Resolutions of Financial Distress

• 成果类型: Article
• 署名作者: Gennaioli, Nicola; Rossi, Stefano
• 署名单位: Bocconi University; Purdue University System; Purdue University
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs129
• 发表日期: 2013
• 页码: 602
• 关键词: investor protection; BANKRUPTCY LAWS; debt structure; short-term; ENFORCEMENT; ECONOMICS; CHOICE; equity

摘要

In a financial contracting model, we study the optimal debt structure to resolve financial distress. We show that a debt structure where two distinct debt classes coexist-one class fully concentrated and with control rights upon default, the other dispersed and without control rights-removes the controlling creditor's liquidation bias when investor protection is strong. These results rationalize the use and the performance of floating charge financing, which refers to debt financing where the controlling creditor takes the entire business as collateral, in countries with strong investor protection. Our theory predicts that the efficiency of contractual resolutions of financial distress should increase with investor protection.