Abstract

http://ssrn.com/abstract=1856255
 
 

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Game Theoretic Analysis of Negotiations under Bankruptcy


Amira Annabi


HEC Montreal

Michèle Breton


HEC Montreal - Department of Management Sciences

Pascal Francois


HEC Montreal - Department of Finance

May 31, 2011


Abstract:     
We extend the contingent claims framework for the levered firm in explicitly modeling the resolution of financial distress under formal bankruptcy as a non-cooperative game between claimants under the supervision of the bankruptcy judge. The identity of the class of claimants proposing the first reorganization plan is found to be a key determinant of the time spent under bankruptcy, the likelihood of liquidation and the renegotiated value of claims. Our quantitative results confirm the economic intuition that a bankruptcy design must trade-off the initial priority of claims with the viability of reorganized firms.

Number of Pages in PDF File: 27

Keywords: bankruptcy procedure, game theory, dynamic programming

JEL Classification: C61, C7, G33, G34

working papers series


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Date posted: May 31, 2011  

Suggested Citation

Annabi, Amira and Breton, Michèle and Francois, Pascal, Game Theoretic Analysis of Negotiations under Bankruptcy (May 31, 2011). Available at SSRN: http://ssrn.com/abstract=1856255 or http://dx.doi.org/10.2139/ssrn.1856255

Contact Information

Amira Annabi
HEC Montreal ( email )
3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H2X 2L3
Canada
Michèle Breton (Contact Author)
HEC Montreal - Department of Management Sciences ( email )
Montreal, Quebec H3T 2A7
Canada
514-340-6490 (Phone)
514-340-5634 (Fax)
Pascal Francois
HEC Montreal - Department of Finance ( email )
3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada
514-340-7743 (Phone)
514-340-5632 (Fax)
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