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| Author: | Cressy, R. |
| Title: | Debt rescheduling versus bankruptcy: the creditor's decision problem |
| Journal: | Journal of Business Finance and Accounting
1996 : OCT, VOL. 23:8, p. 1141-1156 |
| Index terms: | ACCOUNTING BANKS BANKRUPTCY |
| Language: | eng |
| Abstract: | A model of loan rescheduling as an alternative to liquidation is developed which emphasises the central role of the firm's lender (the Bank). Conditions under which the creditor will choose to reschedule rather than precipitate bankruptcy are represented by an optimal policy rule which utilises information provided to the bank by the firm's past debt performance. Rescheduling occurs under non-drastic default and liquidation under drastic default. Rescheduling will always result in a reduction in debt-servicing obligations. |
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