Game Theoretic Analysis of Negotiations under Bankruptcy

Amira Annabi, Michèle Breton and Pascal François

Cahiers de recherche from CIRPEE

Abstract: We extend the contingent claims framework for the levered firm in explicitly modeling the resolution of financial distress under formal bankruptcy as a non-cooperative game between claimants under the supervision of the bankruptcy judge. The identity of the class of claimants proposing the first reorganization plan is found to be a key determinant of the likelihood of liquidation and of the renegotiated value of claims. Our quantitative results confirm the economic intuition that a bankruptcy design must trade-off the initial priority of claims with the viability of reorganized firms.

Keywords: Bankruptcy procedure; game theory; dynamic programming (search for similar items in EconPapers)
JEL-codes: C61 C7 G33 G34 (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-gth and nep-hpe
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:lvl:lacicr:1113

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