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A pareto optimal collaboration period: The role of financial, industrial and macroeconomic conditions in liquidation decision and timing

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Abstract

In this paper, the author highlights the nexus of interactions among financial, industrial and macroeconomic factors determining the Pareto optimal date on which the firm’s claimants stop collaborating and force the firm into liquidation. The condition for optimal liquidation time summarizes the effects of volatility of the aggregate consumer income and the overall price level, demand elasticity, the industry’s concentration level and depreciation on the firm’s going-concern value. It also takes into account the effects of the firm’s level of indebtedness, foregone interest on alternative usages of the financial resources extended to the firm and the costs of risk bearing perceived by the firm’s claimants from continued collaboration.

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Levy, A. A pareto optimal collaboration period: The role of financial, industrial and macroeconomic conditions in liquidation decision and timing. J Econ Finan 16, 1–11 (1992). https://doi.org/10.1007/BF02920104

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  • DOI: https://doi.org/10.1007/BF02920104

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