E ¢ cient Recapitalization

  title={E ¢ cient Recapitalization},
  author={Thomas Philippon},
We analyze government interventions to recapitalize a banking sector that restricts lending to …rms because of debt overhang. We …nd that the e¢ cient recapitalization program injects capital against preferred stock plus warrants and conditions implementation on su¢ cient bank participation. Preferred stock plus warrants reduces opportunistic participation by banks that do not require recapitalization, while conditional implementation limits free riding by banks that bene…t from lower credit… CONTINUE READING

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