Corporate reorganizations and non-cash auctions

Published

Journal Article

This paper extends the theory of non-cash auctions by considering the revenue and efficiency of using different securities. Research on bankruptcy and privatization suggests using non-cash auctions to increase cash-constrained bidder participation. We examine this proposal and demonstrate that securities may lead to higher revenue. However, bidders pool unless bids include debt, which results in possible repossession by the seller. This suggests all-equity outcomes are unlikely and explains the high debt of reorganized firms. Securities also inefficiently determine bidders' incentive contracts and the firm's capital structure. Therefore, we recommend a new cash auction for an incentive contract.

Full Text

Duke Authors

Cited Authors

  • Rhodes-Kropf, M; Viswanathan, S

Published Date

  • January 1, 2000

Published In

Volume / Issue

  • 55 / 4

Start / End Page

  • 1807 - 1849

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/0022-1082.00269

Citation Source

  • Scopus