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- Title
The Evolution of Valuation in Bankruptcy.
- Authors
Simkovic, Michael
- Abstract
Financial analyses such as valuation, solvency and capital adequacy play a crucial role in bankruptcy. Over the course of the 20th century, methods of financial analysis in bankruptcy have shifted from earnings multiples to discounted cashflow (DCF) and recently to market-based approaches such as auctions, market pricing of equity and unsecured debt, and credit spreads. Each shift in bankruptcy court practice followed shifts in financial services industry practice and developments in academic finance. Bankruptcy courts shifted gradually, often several decades after the financial community. Fjewer methods encountered resistance and scepticism, and older methods continued to be used by courts in conjunction with newer methods for many years. Approaches to corporate solvency analysis used in bankruptcy courts and Delaware state courts appear to have mutually influenced each other. The overall pattern reflects a movement toward greater financial and quantitative sophistication by bankruptcy courts and practitioners and, especially in recent years, seems to be driven by a desire for greater accuracy and objectivity.
- Subjects
UNITED States; BANKRUPTCY; DISCOUNTED cash flow; UNITED States. Supreme Court; CAMPBELL Soup Co.; TRONOX Inc.; ACTIONS &; defenses (Law)
- Publication
American Bankruptcy Law Journal, 2017, Vol 91, Issue 2, p299
- ISSN
0027-9048
- Publication type
Article