EconStor >
ifo Institut – Leibniz-Institut für Wirtschaftsforschung an der Universität München >
CESifo Working Papers, CESifo Group Munich >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/30550
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorGale, Douglasen_US
dc.contributor.authorGottardi, Pieroen_US
dc.date.accessioned2010-01-27en_US
dc.date.accessioned2010-05-14T08:22:01Z-
dc.date.available2010-05-14T08:22:01Z-
dc.date.issued2009en_US
dc.identifier.urihttp://hdl.handle.net/10419/30550-
dc.description.abstractWe study a competitive model in which market incompleteness implies that debt-financed firms may default in some states of nature and default may lead to the sale of the firms’ assets at fire sale prices when markets are illiquid. This incompleteness is the only friction in the model and the only cost of default. The anticipation of such losses alone may distort firms’ investment decisions. We characterize the conditions under which fire sales occur in equilibrium and their consequences on firms’ investment decisions. We also show that endogenous financial crises may arise in this environment, with asset prices collapsing as a result of pure self-fulfilling beliefs. Finally, we examine alternative interventions to restore the efficiency of equilibria.en_US
dc.language.isoengen_US
dc.publisherCESifo Münchenen_US
dc.relation.ispartofseriesCESifo working paper 2900en_US
dc.subject.jelD50en_US
dc.subject.jelD80en_US
dc.subject.jelG10en_US
dc.subject.jelG33en_US
dc.subject.ddc330en_US
dc.subject.keywordilliquid marketsen_US
dc.subject.keyworddefaulten_US
dc.subject.keywordincomplete marketsen_US
dc.subject.keywordprice distortionsen_US
dc.subject.keywordinefficient investmenten_US
dc.titleIlliquidity and under-valuation of firmsen_US
dc.typeWorking Paperen_US
dc.identifier.ppn617271429en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungen-
Appears in Collections:CESifo Working Papers, CESifo Group Munich

Files in This Item:
File Description SizeFormat
617271429.pdf487.86 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.