Working Paper: CEPR ID: DP2881
Authors: Francesca Cornelli; Leonardo Felli
Abstract: The restructuring of a bankrupt company often entails its sale. This Paper suggests a way to sell the company that maximizes the creditors' proceeds. The key to this proposal is the option left to the creditors to retain a fraction of the shares of the company. Indeed, by retaining the minority stake, creditors can transfer the control of the company while reducing to a minimum the rents that the sale of the company leaves in the hands of the buyer.
Keywords: auctions; bankruptcy; private benefits; transfer of control
JEL Codes: D44; D82; G32; G33
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Retaining equity stakes (G32) | Creditors' returns (G32) |
| Stronger competition among buyers (D49) | Creditors' returns (G32) |
| Control stake sold (G34) | Efficiency of the sale (D61) |
| Private benefits from control (D61) | Optimal selling strategy (D40) |
| Auctioning control stake while retaining a minority stake (G34) | Maximize price paid by buyer (D41) |