A Market-Based Study of the Cost of Default

• 成果类型: Article
• 署名作者: Davydenko, Sergei A.; Strebulaev, Ilya A.; Zhao, Xiaofei
• 署名单位: University of Toronto; Stanford University; National Bureau of Economic Research
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhs091
• 发表日期: 2012
• 页码: 2959
• 关键词: capital structure; Financial distress; structural models; TERM STRUCTURES; credit spreads; bankruptcy; RISK; FIRMS; liquidation; transactions

摘要

This article proposes a novel method of extracting the cost of default from the change in the market value of a firm's assets upon default. Using a large sample of firms with observed prices of debt and equity that defaulted over fourteen years, we estimate the cost of default for an average defaulting firm to be 21.7% of the market value of assets. The costs vary from 14.7% for bond renegotiations to 30.5% for bankruptcies, and are substantially higher for investment-grade firms (28.8%) than for highly levered bond issuers (20.2%), which extant estimates are based on exclusively. (JEL G21, G30, G33).