Bankruptcy, Finance Constraints, and the Value of the Firm

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dc.contributor.author GALE, Douglas
dc.contributor.author GOTTARDI, Piero
dc.date.accessioned 2011-06-07T10:48:45Z
dc.date.available 2011-06-07T10:48:45Z
dc.date.issued 2011-01-01
dc.identifier.citation American Economic Journal: Microeconomics, 2011, 3, 2, 1-37 en
dc.identifier.uri http://hdl.handle.net/1814/17715
dc.description.abstract We study a competitive model in which market incompleteness implies that debt-financed firms may default in some states of nature, and default may lead to the sale of the firms' assets at fire sale prices when a finance constraint is binding. The anticipation of such "losses" alone may distort firms' investment decisions. We characterize the conditions under which fire sales occur in equilibrium, and their consequences on firms' investment decisions. We also show that endogenous financial crises may arise in this environment, with asset prices collapsing as a result of pure self-fulfilling beliefs. Finally, we examine alternative interventions to restore the efficiency of equilibria. en
dc.language.iso en en
dc.relation.ispartof American Economic Journal: Microeconomics en
dc.title Bankruptcy, Finance Constraints, and the Value of the Firm en
dc.type Article en
dc.identifier.doi 10.1257/mic.3.2.1
dc.neeo.contributor GALE|Douglas|aut|
dc.neeo.contributor GOTTARDI|Piero|aut|EUI70004
dc.identifier.volume 3 en
dc.identifier.startpage 1 en
dc.identifier.endpage 37 en


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