Optimal debt and equity values in the presence of chapter 7 and chapter 11

• 成果类型: Article
• 署名作者: Broadie, Mark; Chernov, Mikhail; Sundaresan, Suresh
• 署名单位: Columbia University; University of London; London Business School
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2007.01238.x
• 发表日期: 2007
• 页码: 1341-1377
• 关键词: optimal capital structure; corporate-debt; credit spreads; term structure; valuation; MODEL; securities; bankruptcy; distress; long

摘要

Explicit presence of reorganization in addition to liquidation leads to conflicts of interest between borrowers and lenders. In the first-best outcome, reorganization adds value to both parties via higher debt capacity, lower credit spreads, and improved overall firm value. If control of the ex ante reorganization timing and the ex post decision to liquidate is given to borrowers, most of the benefits are appropriated by borrowers ex post. Lenders can restore the first-best outcome by seizing this control or by the ex post transfer of control rights. Reorganization is more likely and liquidation is less likely relative to the benchmark case with liquidation only.