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来源类型Working Paper
规范类型报告
DOI10.3386/w28341
来源IDWorking Paper 28341
No-fault Default, Chapter 11 Bankruptcy, and Financial Institutions
Robert C. Merton; Richard T. Thakor
发表日期2021-01-18
出版年2021
语种英语
摘要This paper analyzes the costs and benefits of a no-fault-default debt structure as an alternative to the typical bankruptcy process. We show that the deadweight costs of bankruptcy can be avoided or substantially reduced through no-fault-default debt, which permits a relatively seamless transfer of ownership from shareholders to bondholders in certain states of the world. We show that potential costs introduced by this scheme due to risk shifting can be attenuated via convertible debt, and we discuss the relationship of this to bail-in debt and contingent convertible (CoCo) debt for financial institutions. We then explore how, despite the advantages of no-fault-default debt, there may still be a functional role for the bankruptcy process to efficiently allow the renegotiation of labor contracts in certain cases. In sharp contrast to the human-capital-based theories of optimal capital structure in which the renegotiation of labor contract in bankruptcy is a cost associated with leverage, we show that it is a benefit. The normative implication of our analysis is that no-fault-default debt, when combined with specific features of the bankruptcy process, may reduce the deadweight costs associated with bankruptcy. We discuss how an orderly process for transfer of control and a predetermined admissibility of renegotiation of labor contracts can be a useful tool for resolving financial institution failure without harming financial stability.
主题Microeconomics ; Households and Firms ; Financial Economics ; Financial Institutions ; Corporate Finance ; Other ; Law and Economics ; Industrial Organization ; Firm Behavior
URLhttps://www.nber.org/papers/w28341
来源智库National Bureau of Economic Research (United States)
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条目标识符http://119.78.100.153/handle/2XGU8XDN/586014
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Robert C. Merton,Richard T. Thakor. No-fault Default, Chapter 11 Bankruptcy, and Financial Institutions. 2021.
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