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Investing in Financially Distressed Firms

1990
Investing in Financially Distressed Firms

Author: Murali Ramaswami

Publisher: Praeger

ISBN: UCSC:32106009349041

Category: Business & Economics

Page: 200

View: 784

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Demonstrating that high average returns often accompany wise investment choices concerning bankrupt firms, the authors explain how to spot potential investment targets, assess investment risk, and profit from investing in firms undergoing reorganization following a bankruptcy filing.

New Financing for Distressed Businesses in the Context of Business Restructuring Law

2019-06-29
New Financing for Distressed Businesses in the Context of Business Restructuring Law

Author: Sanford U. Mba

Publisher: Springer

ISBN: 9783030197490

Category: Law

Page: 285

View: 920

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This book focuses on the restructuring of distressed businesses, emphasizing the need for new financing during the restructuring process as well as during relaunch, and examines the role of law in encouraging creditor confidence and incentivizing lending. It describes two broad approaches to encouraging new finance during restructuring: a prescriptive one that seeks to attract credit using expressly defined statutory incentives, and a market-based one that relies on the business judgment of lenders against the backdrop of transaction avoidance rules. Securing new financing for a distressed business is a critical part of successful restructuring. Without such financing, the business may be unable to meet interim liquidity constraints, or to implement its restructuring plans. This book addresses related questions concerning the place of new financing as an essential component of restructuring. In general terms, the book explores how statutory interventions and the courts can provide support with contentious issues that arise from the provision of new financing, whether through new financing agreements or through distressed debt investors, who are increasingly gaining prominence as sources of new financing for distressed businesses. It argues that courts play a key part in preventing or correcting the imbalances that can arise from the participation of distressed debt investors. In this context, it critically examines the distressed debt market in emerging markets like Nigeria and the opportunity presented by non-performing loans, arguing that the regulatory pattern of market entry may dis-incentivize distress debt investing in a market that is in dire need of financing. The book offers a fresh and comparative perspective on restructuring new financing for distressed businesses by comparing various approaches (primarily from the US, UK and Germany) and drawing lessons for frontier markets, with particular reference to Nigeria. It fills an important gap in international comparative scholarship and discusses a living problem with both empirical and policy aspects.

Essays in Macro-finance

2017
Essays in Macro-finance

Author: Nicolas Aragon

Publisher:

ISBN: OCLC:1088500904

Category: International finance

Page: 109

View: 746

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This thesis deals with the economics of crises, within the macro-finance literature. The first chapter, coauthored with Rasmus Pank, deals with how crises emerge. Particularly, we are interested in how confidence affects the outcomes in an experimental asset market where the fundamental value is known by all the participants. We elicit expectations in a way that allows us to measure con-fidence. We ask participants to forecast the one-period-ahead price as a discrete probability mass distribution and find that confidence not only affects the price-formation in markets, but also is important in explaining the dynamics of the bubble. Moreover, as traders' confidence grows, they become increasingly more optimistic, thus increasing the likelihood of price bubbles. The remaining chapters deal with policy responses to crises. The second chapter, "Banks vs Zombies", studies how zombie firms arise in equilibrium and the scope for policy. Zombie firms are otherwise insolvent borrowers who are kept a oat by new credit from banks to cover their losses. The practice, known as evergreening or zombie lending, has occurred in times of financial distress even when debt restructuring is allowed. I study the incentives to restructure debt in a borrower-lender game and provide conditions under which it is optimal to engage in evergreening even when socially inefficient. In normal times, the borrower can access a competitive credit market and pay the opportunity cost of capital. When a shock renders the creditor insolvent, debt needs to be restructured. The firm is locked in a lending relationship and the incumbent bank has monopoly power. Normally, a lender would liquidate the firm. However, the lender is also financially distressed, the incentives to restructure change radically. To keep the firm afl oat and prevent its own bankruptcy, the bank covers the firms losses. It does not, however, fund investment, as the distressed borrower may not use the funds effciently. Evergreening can happen for profitable investments and renegotiation does not solve the problem. I discuss policy alternatives and show that debt haircuts and bank capitalizations must be used simultaneously; and that monetary policy can behave differently in the presence of zombie firms. Finally, I provide evidence supporting the model using a novel panel data set of matched firms and banks for the case of Spain. The final chapter, "Optimal Haircuts", analyzes the desirability of intervention in a simple model of heterogeneous firms and households. Households finance firm's working capital, and the credit constrained firms are heterogeneous in their productivity and hence debt levels. After an unexpected aggregate shock, less productive firms go bankrupt. This directly decreases the wage income of the households, and indirectly decreases their income from the defaulted loans to firms. The main result of the paper is that there is an optimal haircut for deposits such that both firms and families are better off. Moreover, there is a tension between maximizing welfare and maximizing output. This provides a rationale for the Cypriot, Hungarian and Argentinean experience. The model is adapted to an open economy and used to analyze a devaluation shock, which provides policy for countries attempting to escape a monetary union or a currency peg.

Economia Fall 2005

2006-02-01
Economia Fall 2005

Author: Andres Velasco

Publisher: Brookings Institution Press

ISBN: 0815714599

Category: Business & Economics

Page: 322

View: 331

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This semiannual journal from the Latin American and Caribbean Economic Association (LACEA) provides a forum for influential economists and policymakers from the region to share high-quality research directly applied to policy issues within and among those countries.Contents of this edition include The Effects of Migration on Child Health in Mexico (Nicole Hildebrandt and David McKenzie, Stanford University), and Coordinator Failures, Clusters, and Microeconomic Interventions (Andres Rodriguez-Clare, Inter-American Development Bank).

Understanding Financial Management

2009-02-09
Understanding Financial Management

Author: H. Kent Baker

Publisher: John Wiley & Sons

ISBN: 9781405151917

Category: Business & Economics

Page: 504

View: 300

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Designed for those who want to gain an understanding of the fundamental concepts and techniques used in financial management. An underlying premise of the book is that the objective of the firm is to maximize value or wealth. Drawing on a wealth of experience in the academic and professional worlds, the authors discuss how firms can accomplish this objective by making appropriate investment and financing decisions. Bridging the gap between financial theory and practice, the authors present fundamental concepts in an intuitive and nontechnical way, and provide numerous practical financial tips to readers. The focus is on current practice, using results from recent surveys to show the most popular techniques and approaches used by financial managers today. A range of instructor’s resources are available at the accompanying website. Visit www.blackwellpublishing.com/baker for full details.

The Risks and Benefits of Credit Default Swaps and the Impact of a New Regulatory Environment

2014
The Risks and Benefits of Credit Default Swaps and the Impact of a New Regulatory Environment

Author: Christoph Theis

Publisher: Haupt Verlag AG

ISBN: 9783258078854

Category: Credit derivatives

Page: 152

View: 976

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Since the breakout of the current financial crisis and the failures of system-relevant financial institutions such as Lehman Brothers, Bear Stearns and AIG, credit default swaps (CDSs) are being perceived as a double-edged sword and are the subject of a lively discussion in the academic community as well as in the media. In addition, a new regulatory framework is currently under way to be implemented at the European level, which will have a significant impact on CDS market participants. The controversial debates on the role of CDSs during the financial crisis along with the forthcoming regulatory changes make the CDS market an interesting and active field of research. This doctoral thesis comprises four research papers that seek to find answers to open questions regarding the application of credit risk models, the risks and benefits of CDSs and the impact of a new regulatory framework on the CDS market. First, the theoretical foundation for measuring credit risk "with a focus on the application of credit risk models" is provided (see Chapter I). I examine the two main approaches for modeling credit risk, the structural approach and the reduced-form approach and provide valuable insights into the applicability of credit risk models when pricing credit derivatives. Next, the theorized and empirically evidenced risks and benefits found in the CDS market are analyzed (see Chapter II). Subsequent to the analysis, appropriate policy recommendations are derived and discussed. The findings suggest that the identified risks of the CDS market are numerous and particularly detrimental in times of financial crises, which call for effective future policy arrangements. In the following part, I turn the focus towards new regulatory requirements in the CDS market (see Chapter III). In particular, I analyze the design of central counterparties (CCPs) and assess their impact on CDS market participants. The results suggest that CCPs face a delicate.

Fundamentals of Corporate Finance

2021-12-14
Fundamentals of Corporate Finance

Author: Robert Parrino

Publisher: John Wiley & Sons

ISBN: 9781119795438

Category: Business & Economics

Page: 834

View: 838

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Fundamentals of Corporate Finance, 5th Edition develops the key concepts of corporate finance with an intuitive approach while emphasizing computational skills. This course helps students develop an intuitive understanding of key financial concepts and provides them with problem-solving and decision-making skills. Using an intuitive approach, students develop a richer understanding of corporate finance concepts while also enabling them to develop the critical judgments necessary to apply financial tools in real-world decision-making situations. Corporate Finance, 5e offers a level of rigor that is appropriate for both business and finance majors and yet presents the content in a manner that students find accessible.

Finance

1995-12-15
Finance

Author: R.A. Jarrow

Publisher: Elsevier

ISBN: 044489084X

Category: Business & Economics

Page: 1204

View: 826

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Hardbound. The Handbook of Finance is a primary reference work for financial economics and financial modeling students, faculty and practitioners. The expository treatments are suitable for masters and PhD students, with discussions leading from first principles to current research, with reference to important research works in the area. The Handbook is intended to be a synopsis of the current state of various aspects of the theory of financial economics and its application to important financial problems. The coverage consists of thirty-three chapters written by leading experts in the field. The contributions are in two broad categories: capital markets and corporate finance.

Capital Structure and Corporate Financing Decisions

2011-05-03
Capital Structure and Corporate Financing Decisions

Author: H. Kent Baker

Publisher: John Wiley & Sons

ISBN: 9780470569528

Category: Business & Economics

Page: 504

View: 638

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A comprehensive guide to making better capital structure and corporate financing decisions in today's dynamic business environment Given the dramatic changes that have recently occurred in the economy, the topic of capital structure and corporate financing decisions is critically important. The fact is that firms need to constantly revisit their portfolio of debt, equity, and hybrid securities to finance assets, operations, and future growth. Capital Structure and Corporate Financing Decisions provides an in-depth examination of critical capital structure topics, including discussions of basic capital structure components, key theories and practices, and practical application in an increasingly complex corporate world. Throughout, the book emphasizes how a sound capital structure simultaneously minimizes the firm's cost of capital and maximizes the value to shareholders. Offers a strategic focus that allows you to understand how financing decisions relates to a firm's overall corporate policy Consists of contributed chapters from both academics and experienced professionals, offering a variety of perspectives and a rich interplay of ideas Contains information from survey research describing actual financial practices of firms This valuable resource takes a practical approach to capital structure by discussing why various theories make sense and how firms use them to solve problems and create wealth. In the wake of the recent financial crisis, the insights found here are essential to excelling in today's volatile business environment.

Business and the Ethical Implications of Technology

2022-12-11
Business and the Ethical Implications of Technology

Author: Kirsten Martin

Publisher: Springer Nature

ISBN: 9783031187940

Category: Business & Economics

Page: 301

View: 734

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This book focuses on how firms should engage ethical choices in developing and deploying digital technologies. Digital technologies are devices that rely on rapidly accelerating digital sensing, storage, and transmission capabilities to intervene in human processes. While the ethics of technology is analyzed across disciplines from science and technology studies (STS), engineering, computer science, critical management studies, and law, less attention is paid to the role that firms and managers play in the design, development, and dissemination of technology across communities and within their firm. This book covers the topic from three angles. First, it illuminates diverse facets of the intersection of technology and business ethics. Second, it uses themes to explore what business ethics offers to the study of technology and, third, what technology studies offers to the field of business ethics. Each field brings expertise that, together, improves our understanding of the ethical implications of technology. Chapter “A Micro-ethnographic Study of Big Data-Based Innovation in the Financial Services Sector: Governance, Ethics and Organisational Practices", chapter ”The Challenges of Algorithm-Based HR Decision-Making for Personal Integrity" and chapter “Female CEOs and Core Earnings Quality: New Evidence on the Ethics Versus Risk-Aversion Puzzle" are available open access under a Creative Commons Attribution 4.0 International license via link.springer.com.

Corporate Bankruptcy

1996-03-29
Corporate Bankruptcy

Author: Jagdeep S. Bhandari

Publisher: Cambridge University Press

ISBN: 0521457173

Category: Business & Economics

Page: 584

View: 914

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This collection is the first comprehensive selection of readings focusing on corporate bankruptcy. Its main purpose is to explore the nature and efficiency of corporate reorganization using interdisciplinary approaches drawn from law, economics, business, and finance. Substantive areas covered include the role of credit, creditors' implicit bargains, nonbargaining features of bankruptcy, workouts of agreements, alternatives to bankruptcy, and proceedings in countries including the United States, United Kingdom, Europe, and Japan. The Honorable Richard A. Posner, Chief Judge of the U.S. Court of Appeals for the Seventh Circuit, offers a foreword to the collection.