Bankruptcy Choice with Endogenous Financial Constraints

Abstract

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The Real Effects of Zombie Lending in Europe

“…3 Namely, the model and default options are comparable to those of Arellano et al (2012), Senkal (2014, Corbae and D'Erasmo (2017) and Tamayo (2017).…”

“…2 The model of Tamayo (2017) features a dierent type of information asymmetry, with the lender being unable to observe any form of rm productivity but having the option to engage in various types of monitoring.…”

“…Finally, we add to the literature that incorporates a role for multiple rm default choices within a dynamic model of heterogeneous rms. In this context, our model 3 and rm default options are similar to those of Arellano et al (2012), Senkal (2014), Corbae and D'Erasmo (2017) and Tamayo (2017). While Arellano et al (2012) focus on the role of nancial development on rm dynamics, Senkal (2014), Corbae and D'Erasmo (2017) and Tamayo (2017) consider the impact of U.S. bankruptcy laws.…”

“…In this context, our model 3 and rm default options are similar to those of Arellano et al (2012), Senkal (2014), Corbae and D'Erasmo (2017) and Tamayo (2017). While Arellano et al (2012) focus on the role of nancial development on rm dynamics, Senkal (2014), Corbae and D'Erasmo (2017) and Tamayo (2017) consider the impact of U.S. bankruptcy laws. The rm equilibrium model in our study, as well as in Senkal (2014) and Corbae and D'Erasmo (2017), builds on other corporate nance models (see, e.g., Cooley andQuadrini, 2001, Hennessy andWhited, 2007), by incorporating endogenous entry similar to that of Hopenhayn and Rogerson (1993) as well as endogenous renegotiation similar to that of Yue (2010).…”

Reorganization or Liquidation: Bankruptcy Choice and Firm Dynamics

“…5 In an important corporate finance paper, Broadie, Chernov, and Sundaresan [11] study the Chapter 7 versus Chapter 11 decision problem but in a much simpler model with exogenous cash flows and initial bond finance of fixed investment. Also related are Peri [35], who in a model with fixed capital, focuses on labor contract renegotiations during Chapter 11 reorganization, and Tamayo [40], who studies the effects of eliminating Chapter 11 reorganization in a partial equilibrium model with private information where default can lead to liquidation or reorganization but debt is constant over the life of the firm. 6 Other closely related papers that incorporate liquidation include Arellano, Bai and Zhang [6]; D'Erasmo and Moscoso Boedo [16]; Khan, Senga, and Thomas [28]; Meh and Terajima [32]; and Cooper and Ejarque [14].…”