公司理财第五版高等院校双语教材·金融系列-chapter 14.ppt

* * * * * * * * * * * * * * * * * * * * * * * * * * COPYRIGHT?ZHULI * Bankruptcy costs Direct costs of bankruptcy, that is legal and administrative costs Indirect costs of bankruptcy reflect the difficulties of running a company while it is going through bankruptcy Chapter 11 COPYRIGHT?ZHULI * Financial distress without bankruptcy Financial distress is costly when conflicts get in the way of running the business. Stockholders are tempted to forsake the usual objective of maximizing the overall market value of the firm and to pursue narrower self-interest instead. They are tempted to play games at the expense of their creditors. These games add to the costs of financial distress. If the probability of default is high, managers and stockholders will be tempted to take on excessively risky projects. At the same time, stockholders may refuse to contribute more equity capital even if the firm has safe, positive-NPV opportunities. Stockholders would rather take money out of the firm than put new money in. COPYRIGHT?ZHULI * Costs of distress vary with types of asset Some assets, like good commercial real estate, can pass through bankruptcy and reorganization largely unscathed; the values of other assets are likely to be considerably diminished. The losses are greatest for intangible assets that are linked to the continuing prosperity of the firm. Do not think only about whether borrowing is likely to bring trouble. Think also of the value that may be lost if trouble comes. COPYRIGHT?ZHULI * Financial distress: 财务困境 Trade-off theory: 权衡理论 Bankruptcy costs: 破产成本 Chapter 11: 美国破产法第十一章 Real estate: 房地产 COPYRIGHT?ZHULI * Content How borrowing affects value in a tax-free economy Capital structure and corporate taxes Costs of financial distress Explaining financing choices Bankruptcy procedures COPYRIGHT?ZHULI * The trade-off theory Financial managers often think of the firm’s debt-equity decision as a trade-off between interest tax shields and the costs of financial distr