Working Paper
The role of warrants in corporate reorganizations
Abstract: An argument that informational asymmetries explain why the original shareholders of some firms emerge from Chapter 11 bankruptcy proceedings with stock in the reorganized company, while others receive warrants. By proposing a reorganization plan in which they receive warrants, the original stockholders of a firm with good future prospects can signal their superior information to the creditors in a way that firms with poor prospects will not wish to mimic.
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Bibliographic Information
Provider: Federal Reserve Bank of Cleveland
Part of Series: Working Papers (Old Series)
Publication Date: 1995
Number: 9512