Conference Agenda

Session
CF 02: Empirical Capital Structure
Time:
Thursday, 17/Aug/2023:
8:30am - 10:00am

Session Chair: Patrick Verwijmeren, Erasmus University Rotterdam
Location: 4A-33 (floor 4)


Presentations
ID: 961

Do rights offerings reduce bargaining complexity in Chapter 11?

Gunjan Seth

London Business School, United Kingdom

Discussant: Moqi Groen-Xu (Queen Mary University of London)

This paper investigates the role of rights offerings as a new market-based mechanism in resolving valuation uncertainties in U.S. Chapter 11 reorganizations. Using hand-collected data on these offerings, I document three novel facts: (i) in the last decade, they have been used to finance 45% of bankruptcy filings, (ii) hedge funds or private equity firms generally proposed them, and (iii) their occurrence is highly correlated with the performance of the stock market. In an instrumental variable setting, I find that compared with other sources of financing, rights offerings are associated with higher recovery rates, shorter time spent in Chapter 11, and lower bankruptcy refiling rates. They also allow firms to access new capital without resorting to asset liquidations, which are value reducing. Overall, these findings suggest that by alleviating key bargaining frictions in the bankruptcy process, rights offerings may improve the efficiency of resource allocation in the economy.

EFA2023_961_CF 02_1_Do rights offerings reduce bargaining complexity in Chapter 11.pdf


ID: 686

Equity-based compensation and the timing of share repurchases: the role of the corporate calendar

Ingolf Dittmann1, Amy Yazhu Li1, Stefan Obernberger1, Jiaqi Zheng2

1Erasmus University Rotterdam, Netherlands, The; 2University of Oxford

Discussant: Meziane Lasfer (Bayes Business School, City, University of London)

We examine whether CEOs use share repurchases to sell their equity grants at inflated stock prices, a widely shared concern. We document that share repurchases, just like equity grants, vesting dates, and insider trades, are largely affected by the corporate calendar—the firm’s schedule of earnings announcements and blackout periods. The corporate calendar can fully explain why share repurchases and equity-based compensation coincide. Our analysis reveals that firms are actually less likely to repurchase shares when CEOs sell equity. Our findings reconcile earlier studies and highlight the first-order importance of the corporate calendar for the timing of share repurchases.

EFA2023_686_CF 02_2_Equity-based compensation and the timing of share repurchases.pdf


ID: 864

Access to Debt and the Provision of Trade Credit

Matthew Billett1, Kayla Freeman2, Janet Gao3

1Indiana University; 2University of Georgia; 3Georgetown University

Discussant: Lorena Keller (Wharton School, University of Pennsylvania)

We examine how access to debt markets affects firms' provision of trade credit. Using hand collected data on trade credit between customer-supplier pairs, we show that increased access to debt strengthens firms' bargaining power relative to major customers and reduces the trade credit they provide to those customers. We establish causality using the staggered passage of anti-recharacterization laws that increased firms' debt capacity. Affected firms expand their customer base, reduce customer concentration, and decrease trade credit to powerful customers. The decline in trade credit leads customers to cut investment, increase leverage, and scale back trade credit provision to firms further downstream.

EFA2023_864_CF 02_3_Access to Debt and the Provision of Trade Credit.pdf