• Hülya K. K. Eraslan

    1. University of Pennsylvania, U.S.A.
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    • 1

      I thank two anonymous referees for their thoughtful comments and suggestions. I also thank Daniel Bussell, Philip Bond, John Geweke, John Kareken, Kenneth Klee, Andrew McLennan, Antonio Merlo, and Per Strömberg for helpful discussions. I am grateful to Lynn LoPucki many helpful conversations and data support, and to Tjomme Rusticus for his excellent assistance on data collection. Financial support from the National Science Foundation, Graduate School Dissertation Fellowship of the University of Minnesota, and Ford Motor Company Grant from Rodney L. White Center for Financial Research of the University of Pennsylvania is gratefully acknowledged. Please address correspondence to: Hülya K. K. Eraslan, Finance Department, the Wharton School, University, of Pennsylvania, Philadelphia, PA 19104-6367, U.S.A. Phone: 215-898-9424. E-mail:

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    Manuscript received July 2003; revised September 2006.


This article uses a novel approach to measure the unobserved liquidation value of a firm that relies on the information contained in the allocations that are agreed upon in Chapter 11 negotiations. I estimate a game theoretic model that captures the influence of liquidation value on the equilibrium allocations using a newly collected data set. I find that the liquidation values are higher when the industry conditions are more favorable, and the real interest rates are higher. I use the estimated model to conduct a counterfactual experiment to quantitatively assess the impact of a mandatory liquidation on the equilibrium allocations.