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Investment of Financially Distressed Firms

2018
Investment of Financially Distressed Firms

Author:

Publisher:

ISBN: 9286136242

Category:

Page: 35

View: 341

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This paper examines the relationship between net trade credit and firms' investment levels, focusing on financially distressed firms. First, it introduces a theoretical model to predict the role played by net trade credit as a coordination device differentiating firms by their degree of financial distress. Then, it tests these predictions by using a large panel of more than 10 million firms in 23 EU countries over the period 2004-2014. The authors show that while net trade credit has an overall negative impact on capital formation due to liquidity effects, the effect is less pronounced for firms that are in financial difficulties. It is suggested that distressed companies use capital expenditures to maintain vital business relations with their customers in order to participate in final profits via trade credit repayments.

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: 151

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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.

Financial Constraints, the User Cost of Capital and Corporate Investment in Australia

2005
Financial Constraints, the User Cost of Capital and Corporate Investment in Australia

Author: Gianni La Cava

Publisher:

ISBN: OCLC:224047548

Category: Capital

Page: 40

View: 294

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This paper examines the factors that drive corporate investment in Australia using a panel of listed companies covering the period from 1990 to 2004. Real sales growth is found to be a significant determinant of corporate investment. The user cost of capital, which incorporates both debt and equity financing costs, also appears to be an important determinant.The paper also explores the effects of cash flow on investment, allowing for the possibility that the availability of internal funding could significantly affect the investment of financially constrained firms. Cash flow is found to affect investment, though the effects appear more complicated than previously reported in empirical research using Australian data. One innovation of this study is that it distinguishes financially distressed firms from financially constrained firms. The presence of financially distressed firms appears to bias downwards the sensitivity of investment to cash flow. Once separate account has been taken of firms experiencing financial distress, and in contrast to theory, cash flow is found to matter for the investment of both financially constrained and unconstrained firms. Interestingly, the estimated degree of sensitivity appears to be roughly the same for both groups.

Distressed Debt Analysis

2004-11-15
Distressed Debt Analysis

Author: Stephen G. Moyer

Publisher: J. Ross Publishing

ISBN: 9781932159189

Category: Business & Economics

Page: 387

View: 872

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Providing theoretical and practical insight, this book presents a conceptual, but not overly technical, outline of the financial and bankruptcy law context in which restructurings take place. The author uses numerous real- world examples to demonstrate concepts and critical issues. Readers will understand the chess-like, multi- move strategies necessary to achieve financially advantageous results.

Large Shareholders and Financial Distress

2019
Large Shareholders and Financial Distress

Author: Christian C. Opp

Publisher:

ISBN: OCLC:1304235136

Category:

Page: 43

View: 159

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I examine large shareholders' externalities on other claim holders when firms are financially distressed. To this end, I develop a tractable dynamic model of the interplay between these blockholders and regular equity holders. Blockholders' information acquisition and investment decisions play a pivotal role in distressed firms' access to finance, affecting both total firm value and its distribution across claims. The impact on distress costs is non-monotone; whereas blockholders' information exacerbates debt overhang for intermediate levels of distress, it increases firms' survival chances in deep distress. These findings reveal that frictions delaying block acquisitions to "last minute" rescue interventions can in fact be efficiency-enhancing.

Financial Performance of Companies Listed on the Kuwait Stock Exchange. An Exploration Using Altman’s Z-Score Model

2016-08
Financial Performance of Companies Listed on the Kuwait Stock Exchange. An Exploration Using Altman’s Z-Score Model

Author: Payal Chadha

Publisher: Anchor Academic Publishing

ISBN: 9783960670438

Category: Business & Economics

Page: 93

View: 254

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A quantitative method was used to explore the financial performance of the firms listed on the Kuwait Stock Exchange. The number of firms explored was 196 out of a possible 206 (two firms are subsidiaries of one of the firms and others are insurance firms excluded from this study). The listed firms were observed from 2009-2014 to understand their status in the market and the direction they were heading towards. The financial data were gathered from the published annual reports of the respective firms and the financial statements from the Kuwait Stock Exchange website. This exploration is a stepping-stone for potential investors by showing the most profitable sectors for investment and for future researchers to predict accurate bankruptcy rates in the State of Kuwait.

The Role of Debt Analyst Reports for Firms in Financial Distress

2016
The Role of Debt Analyst Reports for Firms in Financial Distress

Author: Jacquelyn R. Gillette

Publisher:

ISBN: OCLC:1050361092

Category: Bond market

Page: 77

View: 206

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"I examine the role of sell-side debt analyst reports in the corporate bond market for financially distressed firms. Debt analysts are not subject to the same conflict-of-interest regulations as equity analysts, and for this reason it is an open question whether their primary function lies in reducing information asymmetry between investors and firm managers in public debt markets (i.e., information role) or in marketing their investment bank and underwriting clients (i.e., marketing role). I test whether debt analyst reports convey new information regarding changes in default risk and recovery rates. I find that debt analysts' bankruptcy and covenant violation predictions are incrementally informative to corporate bond investors, and I find that their reports are more informative for private equity firms (consistent with the information role). However, I also find that the majority of debt analyst reports (57.8%) piggyback on corporate news announcements (i.e., reiterate the information conveyed by other sources) and contain little new information, and the accuracy of the information in their reports is affected by investment banking conflicts of interest (consistent with the marketing role)."--Page v.

Investment Banks and Public Debt Exchange Offers in Financial Distress

2012
Investment Banks and Public Debt Exchange Offers in Financial Distress

Author: Robert M. Mooradian

Publisher:

ISBN: OCLC:1290241703

Category:

Page: 44

View: 336

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This paper examines the relationship between investment bank participation in public debt exchange offers by financially distressed firms and the composition of the offer. Investment banks negotiate with bondholders on behalf of the firm, act as dealer manager for the exchange, promote the offer, and solicit tenders. We find that the structure of exchange offers is significantly related to whether an investment bank participates as an intermediary. Exchange offers with investment bank participation are characterized by significantly greater debt reduction and significantly less senior debt offered to bondholders. Investment bank participation is negatively related to the ratio of commercial bank debt relative to total debt, but positively related to commercial bank debt forgiveness. In general, the results suggest that investment banks and commercial banks perform both substitute and complementary roles in facilitating public debt exchange offers.

Court-Supervised Restructuring of Large Distressed Companies in Asia

2022-07-28
Court-Supervised Restructuring of Large Distressed Companies in Asia

Author: Wai Yee Wan

Publisher: Bloomsbury Publishing

ISBN: 9781509952342

Category: Law

Page: 369

View: 248

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This book provides an in-depth analysis of 4 economically significant Asian jurisdictions: Mainland China, India, Hong Kong and Singapore. These jurisdictions have recently either reformed – or are considering reforming – their corporate restructuring laws to promote regimes conducive to restructuring financially distressed, but otherwise economically viable, companies. Mainland China, India, Hong Kong and Singapore continue to adhere to a framework that requires the court's final approval but draw references from Chapter 11 of the Bankruptcy Code 1978 in the United States and/or the schemes of arrangement in the United Kingdom. However, the institutional and market structures are very different in Asia; in particular, Asia has a far higher concentration in shareholdings among listed firms, including holdings by families and the state, and a different composition of creditors. The book explains how, notwithstanding the legal transplantation, corporate restructuring laws in these Asian jurisdictions have adapted and evolved due to the frictions in shareholder-creditor and creditor-creditor relationships, and the role of the state in resolving non-performing loans and financial distress of state-owned enterprises which are listed, or which issue public debt. The study argues that any reforms must go beyond professionalising the insolvency professionals and the judiciary but must be designed to address fundamental issues of corporate governance, bank regulation and enforcing non-bankruptcy rules. It offers invaluable insights for academics and policy makers alike.

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: 181

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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.