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SUMMARY:Distressed Investment\, Corporate Debt Liquidity\, and Capital Str
 ucture - Alex Gorbenko (UCL)
DTSTART:20230518T114500Z
DTEND:20230518T130000Z
UID:TALK175205@talks.cam.ac.uk
CONTACT:Daniel Simmons
DESCRIPTION:We examine liquidity of corporate debt and capital structure o
 f the firm run by inefficient management in the presence of a distressed i
 nvestor in the secondary debt market. In addition to having superior infor
 mation about the firm's future cash flows\, the distressed investor can in
 stall a more efficient management and restructure the firm in bankruptcy. 
 An unexpected arrival of the investor negatively impacts liquidity of exis
 ting debt claims. However\, liquidity is more nuanced when firms choose th
 eir capital structure in expectation of the distressed investor. In partic
 ular\, if value added from restructuring is sufficiently high in deep defa
 ult states\, liquidity of senior claims optimally issued by the firm can s
 till be low. We derive testable implications and examine the impact of var
 ious Bankruptcy Code provisions on liquidity and capital structure of the 
 firm.
LOCATION:CJBS\, room W202
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