The Library
Dark knights : the rise in firm intervention by CDS investors
Tools
Danis, András and Gamba, Andrea (2023) Dark knights : the rise in firm intervention by CDS investors. Management Science, 70 (2). pp. 952-970. doi:10.1287/mnsc.2023.4717 ISSN 0025-1909.
|
PDF
WRAP-dark-knights-rise-firm-intervention-CDS-investors-AAM-Gamba-2023.pdf - Accepted Version - Requires a PDF viewer. Download (633Kb) | Preview |
Official URL: https://doi.org/10.1287/mnsc.2023.4717
Abstract
There have been several cases in recent years where credit default swap (CDS) buyers and sellers intervene in the restructuring of a distressed firm. We show theoretically that this can increase firm value. Intervention by CDS buyers solves the commitment problem between equity- and debtholders but increases the probability of inefficient liquidation. Intervention by CDS sellers reduces the issue of excessive liquidation while keeping the benefits of CDS buyer intervention. Having both types of intervention decouples the commitment problem from the liquidation problem. Under certain assumptions, the so-called empty creditor problem can be solved and firm value reaches first-best.
Item Type: | Journal Article | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Subjects: | H Social Sciences > HG Finance | ||||||||||
Divisions: | Faculty of Social Sciences > Warwick Business School | ||||||||||
Library of Congress Subject Headings (LCSH): | Swaps (Finance), Default (Finance), Credit derivatives, Bankruptcy | ||||||||||
Journal or Publication Title: | Management Science | ||||||||||
Publisher: | Institute for Operations Research and the Management Sciences (I N F O R M S) | ||||||||||
ISSN: | 0025-1909 | ||||||||||
Official Date: | 29 March 2023 | ||||||||||
Dates: |
|
||||||||||
Volume: | 70 | ||||||||||
Number: | 2 | ||||||||||
Page Range: | pp. 952-970 | ||||||||||
DOI: | 10.1287/mnsc.2023.4717 | ||||||||||
Status: | Peer Reviewed | ||||||||||
Publication Status: | Published | ||||||||||
Access rights to Published version: | Restricted or Subscription Access | ||||||||||
Date of first compliant deposit: | 27 January 2023 | ||||||||||
Date of first compliant Open Access: | 27 January 2023 |
Request changes or add full text files to a record
Repository staff actions (login required)
View Item |
Downloads
Downloads per month over past year