CORPORATE BANKRUPTCY REORGANIZATIONS: ESTIMATES FROM A BARGAINING MODEL

Hülya Eraslan

International Economic Review, 2008, vol. 49, issue 2, 659-681

Abstract: This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations. Copyright ©2008 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:ier:iecrev:v:49:y:2008:i:2:p:659-681

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