The New Bond Workouts

Bond workouts are a famously dysfunctional method of debt restructuring, ridden with opportunistic and coercive behavior by bondholders and bond...Read more

19 June 2017

Teams and Bankruptcy

Corporate bankruptcies constitute an important mechanism through which the economy rids itself of obsolete firms and allocates their constituent...Read more

Ramin Baghai
Rui Silva
Luofu Ye
08 October 2019



Exploiting a bankruptcy reform in Korea, I examine how managers’ personal bankruptcy costs affect firms’ financing and investment decisions. Under the pre-reform auction system, incumbent management was forced to resign and the firm was auctioned to new investors. Under the post-reform management stay system, incumbent management stays in control of the firm during bankruptcy proceedings. I find that firms curb risk- taking under the auction system, when bankruptcy states are costlier for managers.

October 22 2019