The paper decomposes the raw fire sale discount into a quality component, a misallocation component, and a residual liquidity component. We find that distressed airlines under-maintain their fleets and, this quality impairment explains half of the discount. We find no evidence of misallocation to lower productivity users. While the raw discounts are much larger for Chapter 7 tha
n Chapter 11 transactions, the difference is largely explained by longer periods of under-maintenance and consequently lower quality of aircraft sold in Chapter 7. The evidence suggests that the magnitude of welfare losses associated with fire sales are likely to be overstated.
In this article, I discuss the possibilities and limitations of restructuring laws against the background of geopolitical shocks such as the Covid-19...
In this paper, we study how legal uncertainty affects economic activity. We develop a parsimonious model with different types of legal uncertainty that...
We study the effects of a court decision granting creditors the power to force into bankruptcy corporate debtors whose liabilities exceed their assets...