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Table Of Contents

List of Figures
List of Tables
1 Introduction
Table 1: European Corporate Default Counts and Volumes6
2 Motivation and Research Questions
2.1 Definition of the Problem
2.2 Research Questions
2.3 Structure of the Dissertation
3.1 Corporate Financial Distress: Key Terms and Limitations
3.2 Risk Triggers in Financial Distress
Figure 1: Risk Factors of the Company40
3.3.2.1 Early Impairment
3.3.2.2 Financial Distress
Figure 3: The Sequence of Adverse Events in the Downward Spiral102
3.3.2.3 Death Struggle and Distressed Restructuring
Table 2: Restructuring Activities of Financially Distressed Companies111
Figure 4: Thematic Content of the Empirical Research at Hand
3.4 Mechanisms of Financial Distress Resolution
3.4.1 Troubled Debt Restructuring and the Distress Cycle
3.4.2 Obstacles to Efficient Debt Reduction
3.4.3 Methods of Reducing Financial Distress
3.4.3.1 Out-of-Court Restructuring
3.4.3.2 Bankruptcy under Chapter 11
3.4.3.3 Prepackaged Bankruptcy
3.4.4 When to Pursue Which Method?
3.6 Costs of Financial Distress
3.6.2 Magnitude and Determinants of the Indirect Costs of Financial Dis- tress
3.6.3 Direct Costs of Financial Distress
3.7 Micro- versus Macroeconomic Implications of Financial Dis- tress
3.8 Chapter Summary
4.1 The Capital Market Theory Perspective on Risk and Finan- cial Distress
4.1.1 Default Risk and Diversification
4.1.2 Systematic Risk Behavior in Financial Distress
4.1.3 Does Idiosyncratic Risk Matter?
4.2 Models of Distress Risk Assessment
4.2.1 Accounting-Based Models
4.2.1.1 Beaver’s Univariate Analysis of Financial Ratios (1966)
4.2.1.2 Altman’s Z-Score (1968)
4.2.1.3 Ohlson’s O-Score (1980)
4.2.2 Market-Based Models
4.2.2.1 Option to Default Methodology (Merton, 1974)
Figure 7: Basic Option Relationships
4.2.2.2 The KMV Model (1995)
4.3 The “Distress Risk Factor” in Empirical Research
Figure 8: Equity Payoff with Shareholder Advantage330
4.4 Critical Appraisal and Research Gap
5 Empirical Analysis of Risk
5.1 Research Design
5.1.1 Derivation of the Hypotheses
5.1.2 Model Setup
5.1.3 The Fama-MacBeth (1973) Procedure in Detail
5.1.4 Definitions and Description of Variables Used in the Research
5.1.4.1 Black-Scholes-Merton Default Probability
5.1.4.2 Other Variables Used in the Regression Analysis
5.2 Characteristics of the Sample and Descriptive Statistics
Table 4: Sample Description
Figure 9: Year-Wise Proportion of Financially-Distressed Firms (1980-2004)
Table 5: Descriptive Statistics
Table 6: Correlation Matrix
5.3 Time-Series Analysis of Distress Risk Measures
Figure 10: Aggregate Probability of Default (BSM)
Figure 11: Aggregate Beta of the Sample
Figure 12: Aggregate Systematic Risk
Figure 13: Aggregate Total Risk
Figure 14: Sample Mean of Systematic Risk for Sound and Distressed Companies
5.4 Distress Risk Characteristics and Portfolio Returns
Table 7: Characteristics of Portfolios Sorted on the Basis of BSM
5.4.1 Analysis of the Size Effect
Table 8: BSM-Size Portfolio Characteristics
5.4.2 Analysis of the BM Effect
Table 9: BSM-BM Portfolio Characteristics
5.4.3 Analysis of the Idiosyncratic Volatility
5.4.4 Analysis of the Distress Risk Effect
Table 10: BSM-Idiosyncratic Volatility Portfolio Characteristics
Table 11: Distress Effect in Size Portfolios
Table 12: Distress Effect in BM Portfolios
Table 13: Distress Effect in Sigma Portfolios
5.5 Results of Regression Analysis
Table 14: Cross-Sectional Regression Results. Unconditional Model
Table 15: Conditional Regression Analysis for Up and Down Markets
5.6 Chapter Summary: Main Findings
6 Conclusions and Outlook
6.1 Summary of Findings
6.2 Implications for Theory and Practice
6.3 Research Outlook
7 References
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Lemon Brothers

Lemon Brothers

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