Financial Restructuring and Resolution of Banks
- 👤 Speaker: Jean-Edouard Colliard (HEC Paris) 🔗 Website
- 📅 Date & Time: Thursday 24 January 2019, 13:00 - 14:00
- 📍 Venue: Room W4.05 Cambridge Judge Business School
Abstract
How do resolution frameworks affect the private restructuring of distressed banks? We model a distressed bank’s shareholders and creditors negotiating a restructuring given asymmetric information about asset quality and externalities onto the government. This yields negotiation delays used to signal asset quality. We find that strict bail-in rules increase delays by worsening informational frictions and reducing bargaining surplus. We characterize optimal bail-in rules for the government. We then consider the government’s possible involvement in negotiations. We find this can lead to shorter or longer delays. Notably, the government may gin from committing not to partake in negotiations.
Series This talk is part of the Cambridge Finance Workshop Series series.
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Jean-Edouard Colliard (HEC Paris) 
Thursday 24 January 2019, 13:00-14:00