Liquidation Values and Debt Capacity: A Market Equilibrium Approach

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Liquidation Values and Debt Capacity: A Market Equilibrium Approach

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Title: Liquidation Values and Debt Capacity: A Market Equilibrium Approach
Author: Shleifer, Andrei; Vishny, Robert W.

Note: Order does not necessarily reflect citation order of authors.

Citation: Shleifer, Andrei, and Robert W. Vishny. 1992. “Liquidation Values and Debt Capacity: A Market Equilibrium Approach.” The Journal of Finance 47 (4) (September): 1343–1366. Portico. doi:10.1111/j.1540-6261.1992.tb04661.x.
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Abstract: We explore the determinants of liquidation values of assets, particularly focusing on the potential buyers of assets. When a firm in financial distress needs to sell assets, its industry peers are likely to be experiencing problems themselves, leading to asset sales at prices below value in best use. Such illiquidity makes assets cheap in bad times, and so ex ante is a significant private cost of leverage. We use this focus on asset buyers to explain variation in debt capacity across industries and over the business cycle, as well as the rise in U.S. corporate leverage in the 1980s.
Published Version: doi:10.1111/j.1540-6261.1992.tb04661.x
Terms of Use: This article is made available under the terms and conditions applicable to Other Posted Material, as set forth at http://nrs.harvard.edu/urn-3:HUL.InstRepos:dash.current.terms-of-use#LAA
Citable link to this page: http://nrs.harvard.edu/urn-3:HUL.InstRepos:27692663
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