| Author: | Hotchkiss, E. S. Mooradian, R. M. |
| Title: | Vulture investors and the market for control of distressed firms |
| Journal: | Journal of Financial Economics
1997 : MAR, VOL. 43:3, p. 401-432 |
| Index terms: | FINANCIAL CRISES BANKRUPTCY INVESTORS COMPANIES |
| Language: | eng |
| Abstract: | This study examines the role of vulture investors in financially distressed firms. Increased activity in trading claims of distressed companies has been accompanied by increased activity in the market for control of distressed firms. Vulture investors gain control by purchasing senior securities and may become board members or managers of the target firm. The improvement in post restructuring performance relative to pre-default levels is higher when vultures are active in management or/and gain control. The returns to shareholders and bondholders associated with vulture claim purchases are negatively related to the priority of the claim purchased and are greater when vultures are active in the restructured firm. Vulture insvestors seem to serve to discipline managers of firms in financial distress. |
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