This paper shows that public dissemination of trading information for registered corporate bonds reduces valuation errors in Chapter 11 bankruptcy reorganizations by about half, virtually eliminating unintended wealth transfers between claimants and consequent violations of the absolute priority rule. The impact of dissemination is significantly greater where alternative market-based indicators of firm valuation, such as analyst estimates or outside bids for the company's assets are lacking, and significantly lower where hedge funds are among the debtor’s largest unsecured claimants. The results suggest that the transparency of market prices helps improve the distributional efficiency of Chapter 11 bankruptcy and provide support for proposals to increase the availability of market-based signals to aid the valuation process.
{"title":"Do Market Prices Improve the Accuracy of Court Valuations in Chapter 11?","authors":"C. Demiroglu, J. Franks, Ryan Lewis","doi":"10.2139/ssrn.2693056","DOIUrl":"https://doi.org/10.2139/ssrn.2693056","url":null,"abstract":"This paper shows that public dissemination of trading information for registered corporate bonds reduces valuation errors in Chapter 11 bankruptcy reorganizations by about half, virtually eliminating unintended wealth transfers between claimants and consequent violations of the absolute priority rule. The impact of dissemination is significantly greater where alternative market-based indicators of firm valuation, such as analyst estimates or outside bids for the company's assets are lacking, and significantly lower where hedge funds are among the debtor’s largest unsecured claimants. The results suggest that the transparency of market prices helps improve the distributional efficiency of Chapter 11 bankruptcy and provide support for proposals to increase the availability of market-based signals to aid the valuation process.","PeriodicalId":297594,"journal":{"name":"Empirical Corporate Finance","volume":"20 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2016-09-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121490397","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：