Debtor-in-possession financing and the resolution of uncertainty in Chapter 11 reorganizations |
| |
| Authors: | Upinder S. Dhillon, Thomas Noe,Gabriel G. Ramí rez, |
| |
| Affiliation: | aSchool of Management, Binghamton University, Binghamton, NY 13902-6000, United States;bDepartment of Finance, A.B. Freeman School of Business, Tulane University, New Orleans, LA 70118, United States;cDepartment of Economics, Finance, and Quantitative Analysis, Michael Coles College of Business, Kennesaw State University, Kennesaw, GA 30144, United States |
| |
| Abstract: | This paper investigates the use of debtor-in-possession (DIP) financing by firms reorganizing under Chapter 11. A model is developed in which there is asymmetric information between the creditors of a distressed firm and its management. In this context, it is demonstrated that reliance on DIP financing resolves informational asymmetries regarding the true economic value of distressed firms. The model's conclusions are empirically supported in the paper and by results of extant research. The signaling role of DIP financing is evidenced both by the positive stock price reaction to DIP announcements and the fact that firms employing DIP financing have more successful reorganizations. |
| |
| Keywords: | DIP Debtor-in-possession financing Chapter 11 Reorganization Bankruptcy |
| 本文献已被 ScienceDirect 等数据库收录！ |
|
