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Insolvency Resolution and the Missing High-Yield Bond Markets
Stockholm University, Faculty of Social Sciences, Department of Economics.
Number of Authors: 2
2016 (English)In: The Review of financial studies, ISSN 0893-9454, E-ISSN 1465-7368, Vol. 29, no 10, 2814-2849 p.Article in journal (Refereed) Published
Abstract [en]

In many countries, poorly functioning bankruptcy procedures force viable but insolvent firms to restructure out of court, where banks may have a bargaining advantage over other creditors. We model the choice of restructuring process and derive implications for the corporate mix of bank and bond financing. Empirical patterns match the model: inefficient bankruptcy in a country is associated with less bond issuance by risky, but not by safe, borrowers. This pattern holds for both levels of and changes in bankruptcy recovery. Our results establish a link between bankruptcy reform and corporate bond markets, especially high-yield markets. (JEL G32, G33, G21)

Place, publisher, year, edition, pages
2016. Vol. 29, no 10, 2814-2849 p.
Keyword [en]
G32, G33, G21
National Category
Economics and Business
URN: urn:nbn:se:su:diva-136096DOI: 10.1093/rfs/hhw014ISI: 000386207400007OAI: diva2:1050956
Available from: 2016-11-30 Created: 2016-11-29 Last updated: 2016-11-30Bibliographically approved

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Josephson, Jens
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