RT Generic
T1 A theoretical analysis of the stages and events experienced by financially distressed firms
A1 Hamoto, Azad
A1 Correia, Ricardo
A2 Universidad Carlos III de Madrid. Departamento de Economía de la Empresa, 
AB This paper analyses the events that start with financial distress and may eventually lead to theliquidation and/or abandonment of the assets of the firm. It develops a scheme describing thesequence of possible outcomes starting with financial distress based on the existing literature andtaking into account the legal environment in terms of liability and priority rules and bankruptcylaw. An analysis of the treatment of financial distress in the theoretical financial literature is alsoperformed, showing that there is no consensus in the treatment of financial distress. The commoncase of assuming simultaneous default and bankruptcy is shown to lead to suboptimal bankruptcy.Other theoretical approaches are shown to address this problem in different ways such asseparating default from bankruptcy or by including protective covenants. The case of separationbetween default from bankruptcy or liquidation highlights the importance of the interactionbetween the different options present in financial distress. The general case of exogenouslydetermined default is shown to represent a special case that implies the existence of financial andcredit constraints
YR 2012
FD 2012-01
LK https://hdl.handle.net/10016/13115
UL https://hdl.handle.net/10016/13115
LA eng
DS e-Archivo
RD 20 may. 2024