Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5083773 | International Review of Economics & Finance | 2012 | 20 Pages |
Abstract
This paper examines optimal debt reorganization strategies in the presence of agency problems arising from information asymmetry between a firm and a bank during financial distress. In particular, in the structural model, we incorporate complete verification strategies for private information that the firm holds under information asymmetry. We show that under complete verification strategies, the agency conflict because of information asymmetry delays the debt reorganization, leading to a decrease in equity and debt values. These results fit well with the findings of previous empirical works in this area.
Keywords
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Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Takashi Shibata, Yuan Tian,