Asset sales and debt-equity swap under asymmetric information
Economics Letters, 2008, vol. 99, issue 1, 189-191
This paper shows that sale of assets for partial repayment of debt during financial distress may act as a signaling mechanism helping firms to obtain better terms of exchange in debt-equity swap. Although ex-post beneficial, it causes under-investment, ex-ante.
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:99:y:2008:i:1:p:189-191
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