Ex Ante Costs of Violating Absolute Priority in Bankruptcy

The Ex Ante Effects of Bankruptcy Reform on Investment Incentives

More socially efficient results obtain where the current liquidation value of the assets is low. In this situation, the parties will each retain shares of the reorganized firm based on the bargain that they reach. Assuming that both the creditor and the managers have the same discount rate, they will split the value of the firm equally. This being the case, the managers now have the incentive t...

Agency Costs and Deviations from the Absolute Priority Rule in Bankruptcy Reorganization

A theoretical model examines real investment decisions during bankruptcy reorganization and the closing distribution of property rights over capital structure to creditors and equityholders. Estate value is uncertain. Risky real investment levels in firm technology are endogenous and subject to financing constraints with interest rates sensitive to the probability of default and expected credit...

An Ex Ante Model To Estimate Issue Costs

Research of common stock offerings finds that the negative impact of issuance expenses can account for over three-fifths of the fall in the announcement period returns. Given the importance of issue costs, we extend the research by offering a model to estimate expected values for issue costs. This model can be used to generate the expected fall in stock value resulting from issue costs. We also...

Priorities and Priority in Bankruptcy

Ex - ante and ex - post strong correlated

A strong correlated equilibrium is a strategy pro le that is immune to joint deviations. Di erent notions of strong correlated equilibria were de ned in the literature. One major di erence among those de nitions is the stage in which coalitions can plan a joint deviation: before (ex-ante) or after (ex-post) the deviating players receive their part of the correlated pro le. In this paper we prov...