Efficient Recapitalization

61 Pages Posted: 10 Sep 2013

See all articles by Thomas Philippon

Thomas Philippon

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER)

Philipp Schnabl

New York University (NYU) - Department of Finance; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: September 2009

Abstract

We analyze public interventions to alleviate debt overhang among private rms when the government has limited information and limited resources. We compare the e¢ ciency of buying equity, purchasing existing assets, and providing debt guarantees. With sym- metric information, all the interventions are equivalent. With asymmetric information between rms and the government, buying equity dominates the two other interven- tions. We solve for the optimal intervention, and show how it can be implemented with subordinated loans and warrants.

Suggested Citation

Philippon, Thomas and Schnabl, Philipp, Efficient Recapitalization (September 2009). NYU Working Paper No. 2451/28301. Available at SSRN: https://ssrn.com/abstract=2323451

Thomas Philippon (Contact Author)

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Philipp Schnabl

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
New York, NY 10012-1126
United States

HOME PAGE: http://pages.stern.nyu.edu/~sternfin/pschnabl/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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