The effects of asset liquidity on dynamic bankruptcy decisions

Material type: 文書・図像類

Author: Nishihara, Michiほか

Publisher: Graduate School of Economics, Osaka University

Publication date: 2019-09

Material Format: Paper

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Note (General)：: We develop a dynamic bankruptcy model with asset illiquidity. In the model, a distressed firm chooses between sell-out and default, as well as its tim...

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Paper

Material Type: 文書・図像類
Title: The effects of asset liquidity on dynamic bankruptcy decisions
Author/Editor: Nishihara, Michi
Shibata, Takashi
Author Heading: Nishihara, Michi
https://nrid.nii.ac.jp/nrid/1000020456940
Shibata, Takashi
https://nrid.nii.ac.jp/nrid/1000070372597
Publication, Distribution, etc.: Graduate School of Economics, Osaka University
Publication Date: 2019-09
Publication Date (W3CDTF): 2019-09
Periodical title: Discussion Papers In Economics And Business
No. or year of volume/issue: 19-12
Volume: 19-12
Pages: 1-43
Text Language Code: eng
Subject Heading: liquidation
illiquidity
real option
M&A
Target Audience: 一般
Note (General): We develop a dynamic bankruptcy model with asset illiquidity. In the model, a distressed firm chooses between sell-out and default, as well as its timing under the assumption that sell-out is feasible only at Poisson jump times, where the arrival rate of acquirers stands for asset liquidity. With lower asset liquidity, the firm increases the sell-out region to mitigate the risk of not finding an acquirer until bankruptcy. Despite the larger sell-out region, lower asset liquidity increases the default probability and decreases the equity, debt, and firm values. In the optimal capital structure, with lower asset liquidity, the firm reduces leverage, but the cautious capital structure does not fully offset the increased default risk. The stock price reaction caused by sell-out depends on the sell-out timing. When the firm's asset value is not sufficiently high, the stock price jump size is an inverted U-shape with the economic state variable. Lower asset liquidity increases the jump size due to greater surprise. These results fit empirical observations.
Periodical Title (NCID): AA1160366X
https://ci.nii.ac.jp/ncid/AA1160366X
References (URI): URI
http://www2.econ.osaka-u.ac.jp/econ_society/dp/1912.pdf
Data Provider (Database): 国立情報学研究所 : 学術機関リポジトリデータベース（IRDB）（機関リポジトリ）
https://irdb.nii.ac.jp
Original Data Provider (Database): 大阪大学 : 大阪大学学術情報庫　桜華