search query: @author Wruck, K. H. / total: 6
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| Author: | DeAngelo, H. DeAngelo, L. Wruck, K. H. |
| Title: | Asset liquidity, debt covenants, and managerial discretion in financial distress: the collapse of L.A. Gear |
| Journal: | Journal of Financial Economics
2002 : APR, VOL. 64:1, p. 3-34 |
| Index terms: | Liquidity Debt management Financial crises Crisis management |
| Language: | eng |
| Abstract: | The L.A. Gear case illustrates that asset liquidity can give managers substantial operating discretion during financial distress. It also shows that debt covenants ca be stronger disciplinary mechanisms than requirements to meet cash interest payments, why debt contracts typically constrain earnings instead of cash flow, and why cash balances are not equivalent to negative debt, and why debt maturity matters. The authors find that many firms have highly liquid asset structures, thus their managers have the potential to subsidize losing operations should the need arise. |
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