Job Market Paper
Do rights offerings reduce bargaining complexity in Chapter 11?
This paper investigates the role of rights offerings as a new market-based mechanism in resolving valuation uncertainties in U.S. Chapter 11 reorganizations. Using hand-collected data on these offerings, I document three novel facts: (i) in the last decade, they have been used to finance 45% of bankruptcy filings, (ii) hedge funds or private equity firms generally proposed them, and (iii) their occurrence is highly correlated with the performance of the stock market. In an instrumental variable setting, I find that compared with other sources of financing, rights offerings are associated with 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. Overall, these findings suggest that by alleviating key bargaining frictions in the bankruptcy process, 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
Working Papers
Fire Sale and Misallocation
with Julian Franks, Oren Sussman, Vikrant Vig
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 than 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.
Conferences and Seminars: Northeastern University Finance Conference 2022, London Business School 2021, Transatlantic Doctoral Conference 2021, American Finance Association (AFA) 2021
The Limits of Coase: A Study of Financial Distress in the Shipping Industry
with Julian Franks, Oren Sussman, Vikrant Vig
A generally accepted view is that sophisticated bankruptcy procedures are required to mitigate coordination failures and fire sale discounts arising from financial distress. In this paper, we provide empirical evidence addressing this issue using the shipping industry, where the resolution of distress is largely distanced from sovereign bankruptcy procedures. We find that significant institutional and contractual innovations have strengthened the rights of creditors thereby reducing the direct cost of financial distress, for example by lowering coordination failures and reducing fire sale discounts. However, those innovations may have come at a cost to other stakeholders, including crew, port authorities, and the environment, leading to oil spills and the abandonment of under-maintained low valued ships.
Work in Progress
Jurisdiction Shopping and Pollution Relocation
with Zheng Li, Vikrant Vig
Recipient of Research Grant from Wheeler Institute
* Scheduled