Abstract

http://ssrn.com/abstract=1652152
 
 

References (38)



 
 

Citations (1)



 


 



The Impact of Security Trading on Corporate Restructurings


Konstantinos E. Zachariadis


London School of Economics

Ioan Florian Olaru


CastleRock Macro

September 24, 2013


Abstract:     
Hedge funds are heavily involved in corporate restructurings through their debt holdings. A concern is that funds might short the equity of their debtors, vote down a restructuring proposal, and force a firm into inefficient liquidation to gain from their short position. We analyze the strategic game between a firm manager, who makes a restructuring proposal to maximize equityholder value, and a fund that can trade in the debt and equity of the firm. We show that if the trades in the equity market of other non-strategic investors are positive in expectation, potentially because of short selling constraints, and markets are informationally segregated then the manager makes a proposal that allows the fund to profitably execute the above strategy to the detriment of firm value.

Number of Pages in PDF File: 49

Keywords: debt restructuring, short-selling, hedge funds, empty creditors, distressed investing, merger proposals

JEL Classification: G30, G32, G33, G34

working papers series


Download This Paper

Date posted: August 3, 2010 ; Last revised: September 24, 2013

Suggested Citation

Zachariadis, Konstantinos E. and Olaru, Ioan Florian, The Impact of Security Trading on Corporate Restructurings (September 24, 2013). Available at SSRN: http://ssrn.com/abstract=1652152 or http://dx.doi.org/10.2139/ssrn.1652152

Contact Information

Konstantinos E. Zachariadis (Contact Author)
London School of Economics ( email )
Houghton St
Department of Finance
London, WC2A 2AE
United Kingdom
+442079556541 (Phone)
+442078494647 (Fax)
HOME PAGE: http://www2.lse.ac.uk/finance/people/profiles/KostasZachariadis.aspx
Ioan F. Olaru
CastleRock Macro ( email )
101 Park Ave
New York, NY 10178
United States
Feedback to SSRN


Paper statistics
Abstract Views: 748
Downloads: 171
Download Rank: 101,325
References:  38
Citations:  1

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo3 in 0.422 seconds