How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed

• 成果类型: Article
• 署名作者: Andrade, G; Kaplan, SN
• 署名单位: University of Chicago; National Bureau of Economic Research
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/0022-1082.00062
• 发表日期: 1998
• 页码: 1443-1493
• 关键词: PUBLICLY HELD COMPANIES; capital structure; BANKRUPTCY REORGANIZATION; CAMPEAUS ACQUISITION; management buyouts; empirical-analysis; cash flow; performance; debt; CHAPTER-11

摘要

This paper studies thirty-one highly leveraged transactions (HLTs) that become financially, not economically, distressed. The net effect of the HLT and financial distress (from pretransaction to distress resolution, market- or industry-adjusted) is to increase value slightly. This finding strongly suggests that, overall, the HLTs of the late 1980s created value. We present quantitative and qualitative estimates of the (direct and indirect) costs of financial distress and their determinants. We estimate financial distress costs to be 10 to 20 percent of firm value. For a subset of firms that do not experience an adverse economic shock, financial distress costs are negligible.