Financial distress and bankruptcy in highly levered transactions: the comparative roles of debt composition and governance changes
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چکیده
In the HLT literature there is conflicting evidence on the relative impact of debt composition, governance changes and the role of the LBO specialist on the likelihood of financial distress and bankruptcy. In this paper we examine the influence of these factors in a sample of HLTs. Our sample includes not only leveraged buyouts but also leveraged recapitalizations. Observing these transactions over time, we observe that debt composition is a more critical influence than proposed changes in control for the likelihood of an HLT encountering financial distress or going bankrupt. Our evidence is consistent with the Chemmanur and Fulghieri (1994) model of the choice between bank debt and public debt. As a result, our evidence questions the marginal contribution of private equity firms and suggests that further research on their role is needed.
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