What Discount Rate Should Bankruptcy Judges Use? Estimates from Canadian Reorganization Data

Fabrice Barthélémy (), Timothy Fisher and Jocelyn Martel ()

No 2006-19, THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise

Abstract: Using data from financial reorganization plans filed by insolvent Canadian firms, we estimate the discount rate implicit in the unsecured creditors' reorganization decision. Using (HARA) utility functions, we find the implicit monthly discount rate of creditors to be 4.9%, which corresponds to an annual discount rate of 77%. This is 7 to 10 times higher than discount rates used in previous empirical studies of reorganization. The discount rate estimates are robust to varying degrees of risk aversion and market to book value ratio of assets.

Date: 2006
New Economics Papers: this item is included in nep-reg
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://thema.u-cergy.fr/IMG/documents/2006-19.pdf (application/pdf)

Related works:
Journal Article: What discount rate should bankruptcy judges use? Estimates from Canadian reorganization data (2009)
Working Paper: What Discount Rate Should Bankruptcy Judges Use? Estimate from Canadian Reorganization Data (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ema:worpap:2006-19

Access Statistics for this paper

More papers in THEMA Working Papers from THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise Contact information at EDIRC.
Bibliographic data for series maintained by Stefania Marcassa ( this e-mail address is bad, please contact ).