Abstract

http://ssrn.com/abstract=2217669
 
 

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Repo Runs and the Bankruptcy Code


Jun Kyung Auh


Georgetown University - Department of Finance

Suresh M. Sundaresan


Columbia Business School - Finance and Economics

November 2014

Columbia Business School Research Paper No. 13-8

Abstract:     
When the bankruptcy code protects the creditors’ rights with no impairments to secured creditors, issuance of debt with exemption from automatic stay adds no value. When the Code admits violations of absolute priority rules or results in collateral impairments to secured creditors, the liability structure includes short-term debt, with safe harbor protection when the pledged collateral satisfies a minimum liquidity threshold. Safe harbor rights lead firms to issue more short-term debt, less long-term debt, and increases the long-term spreads. Using the 1984 reform of the Code, we offer empirical evidence consistent with the predictions of the model.

Number of Pages in PDF File: 59

Keywords: Run Risk, Safe Harbor Debt, Optimal Liability Structure, Capital Structure, Bankruptcy Code

JEL Classification: G12, G23


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Date posted: February 14, 2013 ; Last revised: November 21, 2014

Suggested Citation

Auh, Jun Kyung and Sundaresan, Suresh M., Repo Runs and the Bankruptcy Code (November 2014). Columbia Business School Research Paper No. 13-8. Available at SSRN: http://ssrn.com/abstract=2217669 or http://dx.doi.org/10.2139/ssrn.2217669

Contact Information

Jun Kyung Auh
Georgetown University - Department of Finance ( email )
3700 O Street, NW
Washington, DC 20057
United States
Suresh M. Sundaresan (Contact Author)
Columbia Business School - Finance and Economics ( email )
3022 Broadway
New York, NY 10027
United States
212-854-4423 (Phone)
212-316-9180 (Fax)
HOME PAGE: http://www0.gsb.columbia.edu/faculty/ssundaresan/

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