Inside debt renegotiation : Optimal debt reduction, timing, and the number of rounds
Moraux, Franck (Université de Rennes I)
Silaghi, Florina (Universitat Autònoma de Barcelona. Departament d'Empresa)

Data:	2014
Resum:	This paper develops a model of debt renegotiation in a structural framework that accounts for taxes, bankruptcy costs and renegotiation costs. To our knowledge, all the previous work on debt renegotiation implies an infinite number of renegotiations. This feature preempts the analysis of the optimal number of renegotiations. We address this drawback by incorporating fixed renegotiation costs in a model of multiple renegotiations, hence obtaining a small finite number of renegotiations. Simple analytical formulae are derived for debt and equity, as well as implicit formulae for the coupon reduction, as a result of a backward recursive technique. The results show that the optimal number of renegotiations, the size and the dynamics of the coupon reductions depend critically on the bargaining power of the claimants. Testable empirical implications regarding multiple costly renegotiations are drawn.
Drets:	Aquest document està subjecte a una llicència d'ús Creative Commons. Es permet la reproducció total o parcial, la distribució, i la comunicació pública de l'obra, sempre que no sigui amb finalitats comercials, i sempre que es reconegui l'autoria de l'obra original. No es permet la creació d'obres derivades.
Llengua:	Anglès
Document:	Article ; recerca ; Versió acceptada per publicar
Publicat a:	Journal of Corporate Finance, 2014, p. 269-295, ISSN 0929-1199

DOI: 10.1016/j.jcorpfin.2014.05.012

Postprint 31 p, 33.0 MB

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