A "wreckers theory" of financial distress

Arbeitspapier

In recent years, a number of papers have established a new empirical regularity. Stocks of distressed firms vastly underperform those of financially healthy firms. It is not necessary to attribute the negative excess returns of distressed firms to inefficient or irrational markets. We show that negative excess returns are the equilibrium outcome when a subset of participants is able to draw returns "in kind" from distressed companies. For firms close to bankruptcy, non-cash returns to ownership will be the dominant form of return to equity. If markets expect a contest for control, these returns will show up in stock valuation. The governance problem described here creates a link between the financial position of a firm and real allocation that may amplify macroeconomic real or financial shocks.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Discussion Paper Series 1 ; No. 2005,40

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading ; Bankruptcy; Liquidation ; Mergers; Acquisitions; Restructuring; Voting; Proxy Contests; Corporate Governance
• Thema: stock market anomalies ; default risk ; private benefits ; moral hazard ; limited liability ; Krisenmanagement ; Zahlungsunfähigkeit ; Börsenkurs ; Kapitalertrag ; Kreditrisiko ; Moral Hazard ; Theorie

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): von Kalckreuth, Ulf
• Ereignis: Veröffentlichung
• (wer): Deutsche Bundesbank
• (wo): Frankfurt a. M.
• (wann): 2005

Weitere Informationen

• Handle: http://hdl.handle.net/10419/19625
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ