Essays on bankruptcy and the resolution of financial distress

That a firm's initial equityholders often emerge from Chapter 11 bankruptcy proceedings with more value than the absolute priority rule (APR) would suggest is now a generally accepted fact. The form in which this value is distributed, however, is less well understood. In particular, why do the original shareholders of some firms emerge from Chapter 11 bankruptcy with stock in the reorganized firm, while others receive warrants? The first essay of this dissertation proposes that informational asymmetries provide the answer to this question. By proposing a reorganization plan in which they receive warrants, the original stockholders of a firm with good future prospects can signal their superior information to the creditors in a way that firms with poor prospects will not wish to mimic.

Name thesis:degree_name

Ph.D.

Level thesis:degree_level

Dissertation

Discipline thesis:degree_discipline

Economics

Grantor

University of Illinois at Urbana-Champaign

Year dc:date

2011

Author dc:creator

• Longhofer, Stanley D.

Contributors dc:contributor

• Kahn, Charles M.

• Economics, Finance
• Economics, Theory

Statement dc:rights

• Copyright 1995 Longhofer, Stanley D.

Language dc:language

eng

Identifier

AAI9543655
(UMI)AAI9543655

OAI identifier oai:identifier

oai:www.ideals.illinois.edu:2142/20015