Ep11 "Is Bankruptcy the End?" with Jim Millstein
All Else Equal: Making Better Decisions
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How Much Debt and Equity Financing Should You Use?
In making the mistake of equating bankruptcy with liqudation, people often make the mistake of subsidizing firms when there's no reason for it. We've heard a lot about when firms get in trouble, we need to baile em out. But let's think a little carefully about what that bailing out actually implies. The only condition under which you wouldn't want to shut the firm down is there's some externality for the firm operating. If the firm has more debt, it's harder to write long term contracts. So my overall risk is the same as it is for the all equity firm. And nill. Finally, let's circle back to the very beginning of
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