Reasoning and Repeated Decisions in Financial Distress

  • Michael I. C. Nwogugu


Both the threat (or possibility) of bankruptcy and the actual bankruptcy process itself are two-sided incentives because: (i) they affect more than three classes of “persons”—they compel both the firm and its creditors and shareholders and third party investment analysts (and in some cases, government regulators) to react and develop strategies; (ii) the efforts and payoffs and perceived intent of each person on a class is affected by the efforts/strategies and payoffs of other parties; (iii) the incentives effects of the incentive mechanism (bankruptcy) on a person is affected by the incentive effects on other persons in a different class. The models in this chapter can be used to develop or refine bankruptcy and/or recovery prediction models.


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Authors and Affiliations

  • Michael I. C. Nwogugu
    • 1
  1. 1.EnuguNigeria

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