The Rodney L. White Center for Financial Research Debt Restructuring and Voting Rules
نویسندگان
چکیده
The voting arrangements used by creditors during debt restructuring are prespecified, often by statute. For example, U.S. law stipulates unanimous agreement outside bankruptcy, but allows for a supermajority vote in Chapter 11 bankruptcy. We analyze the effect of voting rules on the welfare of debtors and their creditors in restructuring negotiations. When markets are liquid, the “toughness” engendered by a requirement of unanimous agreement benefits creditors by more than the rise in the probability of disagreement hurts them. Conversely, if markets are illiquid (or creditors non-Bayesian), a unanimity requirement makes successful restructuring almost impossible, hurting creditors and the debtor alike. We apply our results to the choice of securities issued in exchange offers, to U.S. regulations governing debt restructuring, and to the current debate on the desirability of a sovereign debt restructuring mechanism. On a more technical level, our analysis extends the existing strategic voting literature (see especially Feddersen and Pesendorfer 1997) to the case in which the issue being voted over is endogenous to the voting rule used.
منابع مشابه
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The Rodney L. White Center for Financial Research is one of the oldest financial research centers in the country. It was founded in 1969 through a grant from Oppenheimer & Company in honor of its late partner, Rodney L. White. The Center receives support from its endowment and from annual contributions from its Members. The Center sponsors a wide range of financial research. It publishes a work...
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The voting arrangements used by creditors during debt restructuring are prespecified, often by statute. For example, U.S. law stipulates the use of a unanimous vote outside bankruptcy, but a supermajority vote in Chapter 11 bankrupcty. We analyze the effect of voting rules on the welfare of debtors and their creditors in restructuring negotiations. When creditors are close to rational and marke...
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تاریخ انتشار 2005