Pierre Mella-Barral

• PhD (econ) Cambridge
• Professor (Full) at Toulouse Business School

When firms experience financial distress, equity holders may act strategically, forcing concessions from debtholders and paying less than the originally contracted interest payments. This article incorporates strategic debt service in a standard, continuous time asset pricing model, developing simple closed-form expressions for debt and equity valu...

This article documents the fact that when debtors decide to default on their obligations too early, it is in the creditors' collective interest, as residual claimants, to make concessions prior to forcing a costly liquidation. Symmetrically, when debtors prefer to default at an inefficiently late stage, it is in the creditors' interest to propose a...

We analyze the role of knowhow acquisition in the formation and duration of joint ventures. Two parties become partners in a joint venture to benefit from each other's knowhow. Joint operations provide each party with the opportunity to acquire part of its partner's knowhow. A party's increased knowhow provides the impetus for the dissolution of th...

We analyze the implications of the decision to spawn or to retain a new product for the nature and evolution of the firm. In our model, a new product is spawned if the fit between the product and its parent firm organization is not adequate. We focus on the impact of the firm's history of spawning decisions on firm characteristics such as size, foc...

An early-round investment delivers information about the quality of a project before more funds are needed. To obtain the best early-round financing offer, the entrepreneur should then approach a venture capitalist with highest screening ability. Going for the most accurate venture capitalist can however backfire in a follow-on round of financing....

We examine a rationale for entrepreneurial spin‐outs, when employing firms are not protected from expropriation by their employees, built on the resource‐based view of the firm. We consider a repeated innovations setting and develop the dynamics of the entrepreneurial spin‐out decision. The implications for the gradual development of a sector of ac...

We argue that syndicates associate venture capitalists (VCs) with uneven skill levels in order to lower their expected gains from threatening to stop financing: Non-continued participation would send a milder negative signal to alternative financiers. This can explain the empirical observations that i) early-round syndicates regularly associate VCs...

Firms can voluntarily create independent firms to implement their technologically distant innovations and capture their value through capital markets. We argue that when firms repeatedly compete to make innovations, there is inefficient external implementation of innovations and “excessive” creation of such firms. This inefficiency is most exacerba...

This paper examines two prominent approaches to design efficient mechanisms for debt renegotiation with dispersed bondholders: debt exchange offers that promise enhanced liquidation rights to a restricted number of tendering bondholders (favored under U.S. law), and collective action clauses that allow to alter core bond terms after a majority vote...

We analyze two firms’ choice between merging, allying, and trading assets. We consider a setting in which firms have assets, skills, and core capabilities; skills are the component of organizational capital that increases in the course of joint operations, core capabilities the component that does not. We find that the two firms trade assets for th...

Early round venture capitalists can strategically threaten not to participate in a follow-on round of financing: Non-pursued certification by an incumbent venture capitalist known for accurately spotting quality projects, would send a negative signal to alternative financiers. This threat of strategic decertification leads, in some instances, to cr...

We analyze the implications of entrepreneurial spawning for a variety of firm characteristics such as size, focus, profitability, and innovativeness. We motivate spawning by the desire to achieve a fit between the specialized resource that is firm organization and the requirements for the successful management of a new product. Our model accounts f...

We analyze the consequences of organizational fit for firm size, focus, and prof-itability and for the extent of spawning of new firms by a parent firm. Organizational fit refers to the congruence between a firm's organizational form and the require-ments for the successful management of the firm's product portfolio. We are able to replicate a numb...

We characterize the conditions under which two firms choose to (i) merge, (ii) form an alliance, or (iii) trade assets. For that purpose, we distinguish between the firms' assets, their knowhow, and their core competencies. We show that a merger is chosen when the two firms have similar core competencies. When one firm has markedly higher core comp...

Debt with many creditors is analyzed in a continuous-time pricing model of the levered firm with opportunistic renegotiation offers and default threats. Dispersed creditors accept coupon concessions only in exchange for guaranteed liquidation rights, like collateral. In the ex ante optimal debt contract, this security is provided by assets that gra...

In many European countries, there is an ongoing process and debate about bankruptcy law reform, stimulated by what is perceived as the success of Chapter 11 of the US Bankruptcy Code of 1978. The French bankruptcy laws of 1985 and 1995 and the new German insolvency code enacted in 1999 have accordingly weakened creditor rights and facilitated court...

We present a continuous-time asset pricing model of the levered firm where shareholders select not only the timing but also the form of control transfers. Owners are allowed to walk out of the firm either by (i) defaulting on their debt obligations or (ii) selling the firm with its debt obligations, as in a corporation sale. The structural model re...

Countries can repeatedly and opportunistically renegotiate the terms of agreements to which they can only complicitly assent. Therefore, when attempting to coordinate exchange rate policies, they continuously play partnership games. We develop a reduced form model of exchange rate management where, as a starting point, (a) sequences of discrete rea...

We consider the optimal capital structure of arm in the presence of a tax advantage of debt and costly liquidation. We construct a continuous time model which allows for dynamic debt renegotiation prior to liquidation and for the full transfer of tax loss. We distinguish the case in which strong creditors decide to forgive their debt, from the one...

Debt with many creditors is analysed in a continuous-time pricing model of the levered firm. We specifically allow for debtor opportunism vis-à-vis a non-coordinated group of creditors, in form of repeated strategic renegotiation offers and default threats. We show that the creditors' initial entitlement to non-collateralized assets will be expropr...

In a market-based financial system, credit is held by dispersed creditors, and out-of-court renegotiation of debt is more likely to fail because of hold-out problems; in a bank-based system, out-of-court renegotiation stands good chances to succeed. Since out-of-court renegotiation is a substitute for court-supervised reorganization, the design of...

This paper considers the empirical assessment of the relationship between prices and number of firms in local markets in geographic or, more generally, characteristic space and its use as evidence in merger cases. It outlines a structural, semi-nonparametric econometric model of competition in such markets, examines its testable implications in ter...

This paper provides an analytical solution for the impact of default risk on the valuation of realistically intricate claims on time dependent uncertain income streams. Its modular structure allows us to adjust the set of assumptions concerning the event of default to the specificity of the environment which surrounds the asset. The importance of s...

Please see the more recent version of this paper titled: The Dynamics of Default and Debt Reorganization. This paper documents the fact that in the presence of direct bankruptcy costs, prior to bankruptcy, it becomes in creditors collective interest to reduce their own contractual cash-flow claims. It analyses the pricing and efficiency implication...

This paper examines the pricing and efficiency implications of debt exchange offers. The continuous-time model employed yields simple asset pricing formulae as well as closed-form solutions for the parameters characterising optimal debt exchanges offers. Polar cases are examined in which the debt is either held by a single bank or by many bond-hold...

University of Cambridge/DAE, n° 9416

When a firm is close to bankrupcy, equity-holders may `blackmail' owners of bonds by paying less than the originally-contracted coupon payments. This paper develops simple, closed-form expressions for bond and equity values when such blackmail effects are present. Furthermore, we show that blackmail is optimal in the following sense. Without blackm...

Thesis (Ph. D.)--University of Cambridge, 1995.