Repurchasing Debt
In this paper we build a theoretical model of a firm repurchasing its corporate debt. We find that firm creditors as a group sell debt to the firm only at face value. However, because of the cross-creditor externalities, buying back debt is cheaper and easier when there are many creditors, e.g., whe...
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| Veröffentlicht in: | Management science 2015-07, Vol.61 (7), p.1648-1662 |
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| container_title | Management science |
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| creator | Mao, Lei Tserlukevich, Yuri |
| description | In this paper we build a theoretical model of a firm repurchasing its corporate debt. We find that firm creditors as a group sell debt to the firm only at face value. However, because of the cross-creditor externalities, buying back debt is cheaper and easier when there are many creditors, e.g., when debt is traded on the open market. We further show that repurchases contribute to flexibility in firms' capital structure and can increase ex ante firm value. The value of repurchases to the shareholders increases with the firm's ability to save cash and delay the repurchase.
Data, as supplemental material, are available at
http://dx.doi.org/10.1287/mnsc.2014.1965
.
This paper was accepted by Brad Barber, finance. |
| doi_str_mv | 10.1287/mnsc.2014.1965 |
| format | Article |
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Data, as supplemental material, are available at
http://dx.doi.org/10.1287/mnsc.2014.1965
.
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Data, as supplemental material, are available at
http://dx.doi.org/10.1287/mnsc.2014.1965
.
This paper was accepted by Brad Barber, finance.</description><subject>Analysis</subject><subject>Capital structure</subject><subject>Corporate debt</subject><subject>Creditors</subject><subject>Debt</subject><subject>Debt financing (Corporations)</subject><subject>debt overhang</subject><subject>debt repurchase</subject><subject>Flexibility</subject><subject>Insolvency</subject><subject>Repurchase</subject><subject>savings</subject><subject>Stock redemption</subject><subject>Stockholders</subject><issn>0025-1909</issn><issn>1526-5501</issn><fulltext>true</fulltext><rsrctype>article</rsrctype><creationdate>2015</creationdate><recordtype>article</recordtype><sourceid>N95</sourceid><recordid>eNqFkc1LxDAQxYMouK4evHgTBK-25qNJmuPiNywIoueQ1km3y7ZdM-3B_96UFVdhQQITCL_3JjOPkDNGU8Zzfd20WKacsixlRsk9MmGSq0RKyvbJhFIuE2aoOSRHiEtKqc61mpDTF1gPoVw4rNvq4haK_pgceLdCOPm-p-Tt_u715jGZPz883czmSSmF6BOjOTUSNHCTK6YNGO-cN5kpeKEMz0vPnDZSycIJSh0XDsAwkJ4zxb3IxJRcbnzXofsYAHu77IbQxpaWK62VElTkW6pyK7B167s-uLKpsbSzjAua5XGySCU7qApaCG7VteDr-PyHT3fw8bxDU5c7BVe_BMUQtwUYC9bVosfKDYg7_cvQIQbwdh3qxoVPy6gdw7JjWHYMy45hRcH5RrDEvgs_NM-kZJlR2wHHv4YG__P7AqBKmrE</recordid><startdate>20150701</startdate><enddate>20150701</enddate><creator>Mao, Lei</creator><creator>Tserlukevich, Yuri</creator><general>INFORMS</general><general>Institute for Operations Research and the Management Sciences</general><scope>AAYXX</scope><scope>CITATION</scope><scope>N95</scope><scope>XI7</scope><scope>8BJ</scope><scope>FQK</scope><scope>JBE</scope></search><sort><creationdate>20150701</creationdate><title>Repurchasing Debt</title><author>Mao, Lei ; Tserlukevich, Yuri</author></sort><facets><frbrtype>5</frbrtype><frbrgroupid>cdi_FETCH-LOGICAL-c533t-972095e7e2986179e9faaf949b2b6928cf1a79565ba300a23aee91e5f2162f343</frbrgroupid><rsrctype>articles</rsrctype><prefilter>articles</prefilter><language>eng</language><creationdate>2015</creationdate><topic>Analysis</topic><topic>Capital structure</topic><topic>Corporate debt</topic><topic>Creditors</topic><topic>Debt</topic><topic>Debt financing (Corporations)</topic><topic>debt overhang</topic><topic>debt repurchase</topic><topic>Flexibility</topic><topic>Insolvency</topic><topic>Repurchase</topic><topic>savings</topic><topic>Stock redemption</topic><topic>Stockholders</topic><toplevel>peer_reviewed</toplevel><toplevel>online_resources</toplevel><creatorcontrib>Mao, Lei</creatorcontrib><creatorcontrib>Tserlukevich, Yuri</creatorcontrib><collection>CrossRef</collection><collection>Gale Business: Insights</collection><collection>Business Insights: Essentials</collection><collection>International Bibliography of the Social Sciences (IBSS)</collection><collection>International Bibliography of the Social Sciences</collection><collection>International Bibliography of the Social Sciences</collection><jtitle>Management science</jtitle></facets><delivery><delcategory>Remote Search Resource</delcategory><fulltext>fulltext</fulltext></delivery><addata><au>Mao, Lei</au><au>Tserlukevich, Yuri</au><format>journal</format><genre>article</genre><ristype>JOUR</ristype><atitle>Repurchasing Debt</atitle><jtitle>Management science</jtitle><date>2015-07-01</date><risdate>2015</risdate><volume>61</volume><issue>7</issue><spage>1648</spage><epage>1662</epage><pages>1648-1662</pages><issn>0025-1909</issn><eissn>1526-5501</eissn><abstract>In this paper we build a theoretical model of a firm repurchasing its corporate debt. We find that firm creditors as a group sell debt to the firm only at face value. However, because of the cross-creditor externalities, buying back debt is cheaper and easier when there are many creditors, e.g., when debt is traded on the open market. We further show that repurchases contribute to flexibility in firms' capital structure and can increase ex ante firm value. The value of repurchases to the shareholders increases with the firm's ability to save cash and delay the repurchase.
Data, as supplemental material, are available at
http://dx.doi.org/10.1287/mnsc.2014.1965
.
This paper was accepted by Brad Barber, finance.</abstract><cop>Linthicum</cop><pub>INFORMS</pub><doi>10.1287/mnsc.2014.1965</doi><tpages>15</tpages></addata></record> |
| fulltext | fulltext |
| identifier | ISSN: 0025-1909 |
| ispartof | Management science, 2015-07, Vol.61 (7), p.1648-1662 |
| issn | 0025-1909 1526-5501 |
| language | eng |
| recordid | cdi_proquest_journals_2677663038 |
| source | INFORMS PubsOnLine; Business Source Complete; JSTOR Archive Collection A-Z Listing |
| subjects | Analysis Capital structure Corporate debt Creditors Debt Debt financing (Corporations) debt overhang debt repurchase Flexibility Insolvency Repurchase savings Stock redemption Stockholders |
| title | Repurchasing Debt |
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