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CORPORATE BANKRUPTCY REORGANIZATIONS: ESTIMATES FROM A BARGAINING MODEL *
Author(s) -
Eraslan Hülya K. K.
Publication year - 2008
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/j.1468-2354.2008.00493.x
Subject(s) - bankruptcy , counterfactual thinking , economics , negotiation , value (mathematics) , econometrics , measure (data warehouse) , microeconomics , computer science , finance , mathematics , statistics , philosophy , epistemology , database , political science , law
This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations.