Last Second Comebacks: Examining Influencers of Bankruptcy Success
by Eric Junzhe Zhang
Abstract
The American bankruptcy system allows for companies to file for Chapter 11 bankruptcy to protect their assets from creditors and reorganize their business operations to continue operating after going through bankruptcy court. While the process is meant to help improve the financial health and business operations of companies after they exit the bankruptcy process, supposedly remedied firms will often find themselves filing again for bankruptcy despite the drastic changes they underwent to avoid such a fate. As such, it is difficult to determine what exactly makes a bankruptcy successful, as oftentimes a company with one metric that deems the bankruptcy successful may have another conflicting metric that deems it unsuccessful. This thesis seeks to contribute to prior knowledge on bankruptcy analysis by examining what in-court factors and company metrics drive bankruptcy success, with the change in debt-to-asset ratio and refiling likelihood post emergence being used as measures of bankruptcy success. Probit regression is used to analyze the change in the debt-to-asset ratio from bankruptcy filing to emergence while multivariable regression analysis is used to analyze the likelihood of refiling post-bankruptcy emergence. Explanatory variables which will be examined across these two variables will be the time spent in bankruptcy court, whether there was forum shopping to Delaware or New York, size of assets / EBIT of the firm, hedge fund presence, CEO turnover, whether a case was prepackaged, unionization rate, prime rate at filing and emergence, whether there was a 363 asset sale, whether a firm remained public following emergence, and debtor in possession financing. Results suggest that likelihood of refiling is a better measure of bankruptcy success than relative change in debt-to-asset ratio, which faces issues with the significance of its variables and their explanatory power.
Professor Connel Fullenkamp, Faculty Advisor
Professor Michelle Connolly, Faculty Advisor
JEL Codes: G33, K22, G34
Beyond the But-For World: Weak-necessity causal reasoning for model-based counterfactuals in law and economics
by Lilia Qian
Abstract
Under current standards for scientific evidence defined under Daubert, antitrust models are frequently excluded from legal consideration, but not always for reasons that make them genuinely unreliable. This paper clarifies why antitrust models face difficulties when subjected to methodological scrutiny: the employment of model-based counterfactual arguments under an epistemically defective ‘but-for’ structure of causation. Assessing the relevance and reliability of an antitrust model is a matter of assessing the validity and applicability of the causal claim it makes, not the degree to which the modeling methodology is considered scientific. A more flexible causal framework, the weak-necessity structure of causation, is suggested as a means of developing and evaluating model-based counterfactuals. This framework allows for modeling of overdetermined-causation situations, or situations in which the outcome of interest can be attributed to two or more causes. Since antitrust cases typically involve overdetermined causation, the weak-necessity framework allows them to be modeled in a more precise and intuitive way.
Professor Kevin Hoover, Faculty Advisor
JEL Codes: B41, K21, L41, L44
Evaluation of the Impact of New Rules in FCC’s Spectrum Incentive Auction
By Elizabeth Lim, Akshaya Trivedi and Frances Mitchell
On March 29, 2016, the FCC initiated its first ever two-sided spectrum auction. The auction closed approximately one year later, having repurposed a total of 84 megahertz (MHz) of spectrum. The “Incentive Auction” included three primary components: (1) a reverse auction where broadcasters bid on the price at which they would voluntarily relinquish their current spectrum usage rights, (2) a forward ascending clock auction for flexible use wireless licenses which determined the winning bids for licenses within a given geographic region, and (3) an assignment phase, where winning bidders from the forward auction participated in single-bid, second price sealed auctions to determine the exact frequencies individual licenses would be assigned within that geographic region. The reverse auction and the forward auction together constituted a “stage.” To guarantee that sufficient MHz were cleared, the auction included a “final stage rule” which, if not met, triggered a clearing of the previous stage and the start of a new stage. This rule led to a total of four stages taking place in the Incentive Auction before the final assignment phase took place. Even at first glance, the Incentive Auction is unique among FCC spectrum auctions. Here we consider the estimated true valuation for these licenses based on market conditions. We further compare these results to more recent outcomes in previous FCC spectrum auctions for wireless services to determine if this novel auction mechanism
impacted auction outcomes.
Advisor: Michelle Connolly | JEL Codes: L5, O3, K2, D44, L96
Small Bidder Preferences in FCC Spectrum Auctions
By Alexandra Zrenner and Chidinma Hannah Nnoromele
The Federal Communications Commission faces a congressional mandate to ensure the participation of small business in its spectrum auctions. The FCC addresses this mandate using preferences for small bidders. This paper examines the impact on auction competition and outcomes of two preferences: bid credits and closed licenses. Bid credits are subsidies for small bidders, specifically, percentage discounts for winning bids made by small bidders. Closed licenses are set-asides for small bidders, that is, only small bidders are allowed to bid on a closed license. We analyze the auction results of 7,167 spectrum licenses for personal communication services. We specifically examine the number of bidders competing for a license, and the presence and use of bid credits and closed licenses. Our results demonstrate that the efficiency gains from competition are outweighed by the efficiency losses of small bidder preferences.
Advisor: Michelle Connolly | JEL Codes: L5, L96, K20
Market Power & Reciprocity Among Vertically Integrated Cable Providers
By Jeffery Shih-kai Shen
This paper seeks to investigate the effects of vertical integration on the cable industry. There are two main goals that the research paper will attempt to address. The first is to build upon existing research on favoritism shown by multichannel video programming distributors (MVPDs) to affiliated video programming networks. Second, the paper will use 2007 and 2010 industry data to investigate the possible existence of “quid pro quo” among vertically integrated MVPD cable providers. After evaluating the data with multivariate OLS Regressions, the evidence suggests that MVPD cable providers do tend to carry their own affiliated programming networks. Furthermore, the evidence supports the hypothesis that reciprocity relationships exist among major vertically integrated cable providers.
Advisors: Leslie Marx | JEL Codes: C01, D22, K21 | Tagged: Cable Provider, Empirical Analysis, Programming Distributor, Programming Network, Vertical Integration
Measuring the Likelihood of Small Business Loan Default: Community Development Financial Institutions (CDFIs) and the use of Credit-Scoring to Minimize Default Risk1
By Andrea Coravos
Community development financial institutions (CDFIs) provide financial services to underserved markets and populations. Using small business loan portfolio data from a national CDFI, this paper identifies the specific borrower, lender, and loan characteristics and changes in economic conditions that increase the likelihood of default. These results lay the foundation for an in-house credit-scoring model, which could decrease the CDFI’s underwriting costs while maintaining their social mission. Credit-scoring models help CDFIs quantify their risk, which often allows them to extend more credit in the small business community.*
Advisor: Charles Becker | JEL Codes: K22, M1,
The Financial Impact of the Oil Pollution Act: Do the Penalties Resulting from Oil Spills Fulfill the Purpose of the OPA?
by Melissa Keever
Abstract
This paper explores the financial impact of the Oil Pollution Act (OPA) on oil companies for oil spills. Total penalty per barrel, including civil and criminal penalties, and total cost per barrel for oil spills are analyzed prior OPA and post OPA. Difference-in-differences estimation is used to determine if penalties and costs for an oil spill increased post OPA in accordance with the purpose of the OPA to hold companies more financially responsible for oil spills, especially damaging ones. With the exception of criminal penalty per barrel, the analysis suggests that the OPA is not achieving the desired financial impact.
Professor Christopher Timmins, Faculty Advisor
JEL Codes: K2
