Conflicts of Interest and Market Illiquidity in Bankruptcy Auctions: Theory and Tests

Per Strömberg

Journal of Finance, 2000, vol. 55, issue 6, 2641-2692

Abstract: I develop and estimate a model of cash auction bankruptcy using data on 205 Swedish firms. The results challenge arguments that cash auctions, as compared to reorganizations, are immune to conflicts of interest between claimholders but lead to inefficient liquidations. I show that a sale of the assets back to incumbent management is a common bankruptcy outcome. Sale‐backs are more likely when they favor the bank at the expense of other creditors. On the other hand, inefficient liquidations are frequently avoided through sale‐backs when markets are illiquid, that is, when industry indebtedness is high and the firm has few nonspecific assets.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (57)

Downloads: (external link)
https://doi.org/10.1111/0022-1082.00302

Related works:
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:bla:jfinan:v:55:y:2000:i:6:p:2641-2692

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().