Who Pulls the Plug? Theory and Evidence on Corporate Bankruptcy Decisions

Zhipeng Zhang ()

MPRA Paper from University Library of Munich, Germany

Abstract: We offer a model and evidence on firms' optimal bankruptcy decisions. In the model, both the borrower and bank lenders can trigger a bankruptcy filing. We show that debt composition has significant influence on corporate bankruptcy decisions. For example, firms with a small share of bank debt as a fraction of total debt tend to voluntarily file for bankruptcy. When a firm depends heavily on bank debt, the bankruptcy boundary is more likely to be determined by the bank. Our results highlight the control rights of large private creditors in distressed firms.

Keywords: Voluntary bankruptcy; Forced bankruptcy; Bankruptcy boundary; Debt structure; Creditor control. (search for similar items in EconPapers)
JEL-codes: G21 G32 G33 (search for similar items in EconPapers)
Date: 2009-06-01, Revised 2009-10-05
New Economics Papers: this item is included in nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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https://mpra.ub.uni-muenchen.de/18166/1/MPRA_paper_18166.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:17676

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