title: Costs of insolvency: Types and estimation approaches
metadata.name: dc.contributor.author
metadata.value: Fomin, Maksim V.
metadata.lang: -
metadata.name: dc.date.accessioned
metadata.value: 2017-07-18T12:34:51Z
metadata.lang: -
metadata.name: dc.date.available
metadata.value: 2017-07-18T12:34:51Z
metadata.lang: -
metadata.name: dc.date.issued
metadata.value: 2017-06
metadata.lang: -
metadata.name: dc.identifier.citation
metadata.value: Fomin M. V. Costs of insolvency: Types and estimation approaches. Vestnik of Saint Petersburg University. Management, 2017, vol. 16, issue 2, pp. 215–241.
metadata.lang: en_GB
metadata.name: dc.identifier.other
metadata.value: 10.21638/11701/spbu08.2017.202
metadata.lang: -
metadata.name: dc.identifier.uri
metadata.value: http://hdl.handle.net/11701/6903
metadata.lang: -
metadata.name: dc.description.abstract
metadata.value: The purpose of the article is to construct a new classification of costs of insolvency, estimations of which are needed for management to choose optimal capital structure. To handle the purpose of the study, academic articles, related to bankruptcy costs, insolvency costs and the costs of financial distress with specific attention to cost classification, estimation methods and empirical results, have been reviewed.
  The findings of the paper are as follows. The traditional classification of insolvency costs divides them into direct and indirect costs. Firstly, it is shown that current methodology can only estimate aggregate effect of indirect insolvency costs and cannot distinguish their effect. Secondly, the direct insolvency costs are taken by creditors, not shareholders. Furthermore, there is empirical evidence that direct insolvency costs depend not on capital structure, but on other factors (secured claims, asset specificity and liquidity). This makes such costs irrelevant to trade-off theory because it assumes that insolvency costs depend on capital structure. Thirdly, the traditional classification omits costs of restructuring which are taken not by creditors, but by shareholders and thus are relevant for them.
  The paper has several implications. Firstly, research on optimal capital structure should focus more on indirect costs and costs of restructuring because those costs are relevant for shareholders. Secondly, the practical implication of the paper is assigning costs estimation methodologies to different types which is relevant to practitioners because the literature is silent on how to measure the costs.
metadata.lang: en_GB
metadata.name: dc.language.iso
metadata.value: ru
metadata.lang: en_GB
metadata.name: dc.publisher
metadata.value: St Petersburg State University
metadata.lang: en_GB
metadata.name: dc.relation.ispartofseries
metadata.value: Vestnik of St Petersburg University. Management;Volume 16; Issue 2
metadata.lang: -
metadata.name: dc.subject
metadata.value: insolvency costs
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: financial distress
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: bankruptcy costs
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: trade-off theory
metadata.lang: en_GB
metadata.name: dc.subject
metadata.value: capital structure
metadata.lang: en_GB
metadata.name: dc.title
metadata.value: Costs of insolvency: Types and estimation approaches
metadata.lang: en_GB
metadata.name: dc.type
metadata.value: Article
metadata.lang: en_GB
resources.filename: 02-Fomin.pdf
resources.url: https://dspace.spbu.ru/bitstream/11701/6903/1/02-Fomin.pdf
resources.format: Adobe PDF
resources.size: 232,82 kB