Theres a sizable gap between what a company is worth in liquidation and what its worth while still operating, according to University of California at Berkeleys Amir Kermani and Chicago Booths Yueran Ma. Companies going through Chapter 11 restructuring are worth about twice as much when they are going concerns rather than liquidated, they write.
The finding is part of a larger study of corporate debt, in which Kermani and Ma examine the size and composition of the debt loads held by nonfinancial companies. They distinguish between asset-based debt (issued against discrete assets) and cash flowbased debt (issued against the operating value of a company). In doing so, they wondered about companies cash-flow and asset valuesessentially, ho…
Read the full article at: https://review.chicagobooth.edu/finance/2020/article/don-t-kill-company-collect-debt