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Isidro, H., Raonic, I. & Gietzmann, M. (2014). Vulture Funds and Fresh Start Accounting of Firms Emerging from. INSEAD Accounting Research Seminar.

H. O. Isidro et al.,  "Vulture Funds and Fresh Start Accounting of Firms Emerging from", in INSEAD Accounting Research Seminar, Paris, 2014

@misc{isidro2014_1714799597346,
	author = "Isidro, H. and Raonic, I. and Gietzmann, M.",
	title = "Vulture Funds and Fresh Start Accounting of Firms Emerging from",
	year = "2014",
	howpublished = "Outro",
	url = ""
}

TY  - CPAPER
TI  - Vulture Funds and Fresh Start Accounting of Firms Emerging from
T2  - INSEAD Accounting Research Seminar
AU  - Isidro, H.
AU  - Raonic, I.
AU  - Gietzmann, M.
PY  - 2014
CY  - Paris
AB  - When  firms  emerge  from  Chapter  11  bankruptcy  of  the  US  Bankruptcy  Code  historic

accounting valuations are cancelled and replaced with updated synthetic market value estimates in 
order to give the firm a fresh start. We find that distress oriented hedge funds that follow a loan 
to own investment strategy (i.e. vulture funds that acquire distressed debt that is swapped for 
equity in the emerging firm) strategically influence the fresh start accounting value of the 
Chapter 11 firm. Holding critical positions in the capital structure of the distressed firm grants 
vulture funds great influence over the bankruptcy negotiations and the determination of the fresh 
start value. They have strong incentives to influence fresh start valuations because the effective 
implementation of a loan to own strategy critically depends on the value of their equity position 
at emergence. We test for such influence by looking at changes in firm value before and after 
emergence from Chapter 11. We find that the vulture funds that hold strategic debt positions can 
maximize their returns by driving down firm value at the emergence of Chapter 11 and then they are 
pleased to see them being driven up
when actual market trading commences.

ER  -