Article Abstract:
We present a model of a financially distressed firm with outstanding bank debt and public debt. Coordination problems among public debtholders introduce investment inefficiencies in the workout process. In most cases, these inefficiencies are not mitigated by the ability of firms to buy back their public debt with cash and other securities - the only feasible way that firms can restructure their public debt. We show that Chapter 11 reorganization law increases investment, and we characterize the types of corporate financial structures for which this increased investment enhances efficiency. (Reprinted by permission of the publisher.)
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Article Abstract:
Within the context of takeovers, this paper shows that in private-value auctions the optimal individually rational strategy for a bidder with partial ownership of the item is to overbid, i.e., to bid more than his valuation. This strategy, however, can lead to (i) an inefficient outcome, and (ii) the winning bidder making a net loss. Further, the overbidding result implies that the presence of a large shareholder increases the bid premium in single-bidder takeovers at the expense of reducing the probability of the takeover actually occurring. (Reprinted by permission of the publisher.)
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Article Abstract:
The role of a takeover in settling stockholder disagreements about future production policies is examined. Takeover bid equilibria must match the firms good and the stockholders good in a productive exchange equilibrium. A model is developed to provide a simultaneous change in stockholder and production plans.
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