Debt restructuring through equity issues
This paper examines whether new equity may be issued to recapitalize existing assets in financially distressed firms. Using a sample of 3,184 follow-on primary common stock issues offered by Korean publicly traded firms from 2000–2013, we find that more than one-third of the equities are issued to c...
| Main Authors: | , , |
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| Format: | Article |
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2019
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| Subjects: | |
| Online Access: | http://eprints.sunway.edu.my/1089/ |
| _version_ | 1848801970970689536 |
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| author | Kim, Woojin Ko, Young Kyung * Wang, Shu Feng |
| author_facet | Kim, Woojin Ko, Young Kyung * Wang, Shu Feng |
| author_sort | Kim, Woojin |
| building | SU Institutional Repository |
| collection | Online Access |
| description | This paper examines whether new equity may be issued to recapitalize existing assets in financially distressed firms. Using a sample of 3,184 follow-on primary common stock issues offered by Korean publicly traded firms from 2000–2013, we find that more than one-third of the equities are issued to creditors in direct exchange for debt. We also determine that equity issuers are in severe financial distress prior to the issue and are more likely to experience a subsequent change in control. The proceeds are used more to replace existing debt than to increase R&D. These findings suggest that equity issues in emerging markets may be used primarily to recapitalize existing assets through debt restructuring or control transfers rather than to finance growth options. |
| first_indexed | 2025-11-14T21:15:55Z |
| format | Article |
| id | sunway-1089 |
| institution | Sunway University |
| institution_category | Local University |
| last_indexed | 2025-11-14T21:15:55Z |
| publishDate | 2019 |
| recordtype | eprints |
| repository_type | Digital Repository |
| spelling | sunway-10892019-08-16T09:04:05Z http://eprints.sunway.edu.my/1089/ Debt restructuring through equity issues Kim, Woojin Ko, Young Kyung * Wang, Shu Feng HF5601 Accounting This paper examines whether new equity may be issued to recapitalize existing assets in financially distressed firms. Using a sample of 3,184 follow-on primary common stock issues offered by Korean publicly traded firms from 2000–2013, we find that more than one-third of the equities are issued to creditors in direct exchange for debt. We also determine that equity issuers are in severe financial distress prior to the issue and are more likely to experience a subsequent change in control. The proceeds are used more to replace existing debt than to increase R&D. These findings suggest that equity issues in emerging markets may be used primarily to recapitalize existing assets through debt restructuring or control transfers rather than to finance growth options. 2019-09 Article PeerReviewed Kim, Woojin and Ko, Young Kyung * and Wang, Shu Feng (2019) Debt restructuring through equity issues. Journal of Banking & Finance, 106. pp. 341-356. ISSN 03784266 http://doi.org/10.1016/j.jbankfin.2019.07.002 doi:10.1016/j.jbankfin.2019.07.002 |
| spellingShingle | HF5601 Accounting Kim, Woojin Ko, Young Kyung * Wang, Shu Feng Debt restructuring through equity issues |
| title | Debt restructuring through equity issues |
| title_full | Debt restructuring through equity issues |
| title_fullStr | Debt restructuring through equity issues |
| title_full_unstemmed | Debt restructuring through equity issues |
| title_short | Debt restructuring through equity issues |
| title_sort | debt restructuring through equity issues |
| topic | HF5601 Accounting |
| url | http://eprints.sunway.edu.my/1089/ http://eprints.sunway.edu.my/1089/ http://eprints.sunway.edu.my/1089/ |