Strategic Default and Equity Risk Across Countries

• 成果类型: Article
• 署名作者: Favara, Giovanni; Schroth, Enrique; Valta, Philip
• 署名单位: International Monetary Fund; University of Amsterdam; Hautes Etudes Commerciales (HEC) Paris
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2012.01781.x
• 发表日期: 2012
• 页码: 2051-2095
• 关键词: ASSET PRICE DYNAMICS; cross-section; corporate-investment; BANKRUPTCY CODES; Creditor rights; optimal debt; valuation; ENFORCEMENT; return

摘要

We show that the prospect of a debt renegotiation favorable to shareholders reduces the firms equity risk. Equity beta and return volatility are lower in countries where the bankruptcy code favors debt renegotiations and for firms with more shareholder bargaining power relative to debt holders. These relations weaken as the countrys insolvency procedure favors liquidations over renegotiations. In the limit, when debt contracts cannot be renegotiated, equity risk is independent of shareholders incentives to default strategically. We argue that these findings support the hypothesis that the threat of strategic default can reduce the firms equity risk.