Job Market Paper
This paper investigates the role of rights offerings in U.S. Chapter 11 reorganizations as a new market-based mechanism for mitigating bargaining frictions. Using hand-collected data, I document three novel facts: (i) in the past decade, rights offerings financed 47% of bankruptcies, (ii) they are typically proposed and underwritten by hedge funds or private equity firms, and (iii) their occurrence is highly correlated with stock market performance. In an instrumental variable setting, I find that compared with other sources of financing, rights offerings lead to higher recovery rates, shorter time spent in Chapter 11, and lower bankruptcy refiling rates. They also allow firms to access new capital without resorting to asset liquidations, which are value-reducing. My findings suggest that by alleviating key bargaining frictions in large and complex bankruptcy cases, rights offerings may improve the efficiency of resource allocation in the economy.
Winner, Midwest Finance Association, Paul Van Arsdell Outstanding Paper Award in Corporate Finance, 2023
Winner, German Finance Association Doctoral Student Best Paper Award, 2022
Finalist, AQR Fellowship Award for Research Excellence, 2022
Conferences and Seminars: Copenhagen Business School, HEC Paris, HKU Business School, HKUST, INSEAD, Kelley School of Business, LSE, Michigan Ross, NUS, Rutgers Business School, UBC Sauder School of Business, University of Wisconsin-Madison, USC Marshall, UVA Darden, UW Foster School of Business, Warwick Business School, Wharton, European Finance Association (EFA) 2023, Northern Finance Association (NFA) 2022, Financial Management Association (FMA Europe) 2022, German Finance Association (DGF) 2022, Corporate Restructuring and Insolvency Seminar, Midwest Finance Association (MFA) 2023, Transatlantic Doctoral Conference 2022, London Business School Alumni Workshop 2022, Nova Finance Final Countdown 2022, HEC Paris Finance Workshop 2022
Using data from aircraft sales by distressed airlines, we examine the extent to which fire sales lead to misallocation of assets. Our results show that aircraft, on average, are reallocated from lower productivity sellers to higher productivity buyers. Moreover, in the hands of new owners, aircraft purchased from distressed sellers have lower productivity compared with other similar aircraft operated by the same buyer. This lower productivity is consistent with long-term quality impairment resulting from undermaintenance of the aircraft by distressed sellers. Controlling for undermaintenance in hedonic regressions, the high fire sale discounts reported by Pulvino (1998, 1999) are halved in magnitude. The evidence suggests fire sales, instead of triggering a misallocation, terminate it.
Conferences and Seminars: Northeastern University Finance Conference 2022, London Business School 2021, Transatlantic Doctoral Conference 2021, American Finance Association (AFA) 2021
The shipping industry provides a unique laboratory for examining the limits of Coase for resolving financial distress since the industry is largely detached from sovereign bankruptcy procedures. We find that private contracts and institutions have evolved to resolve coordination failures: for example, we find a low incidence of vessel seizures, ports that compete to enforce creditor rights, and small fire sale discounts. However, we report significant spillovers of financial distress for other stakeholders, particularly environmental, who bear the costs of under maintained vessels, including oil spills, and abandonment of derelict ships, which end up in toxic breaker yards.