Managing Financial Distress and Valuing Distressed Securities: A Survey and a Research Agenda

The role of high leverage in corporate restructuring, popularity of junk bonds (original-issue, high-yield bonds) and the savings & loan crisis have been important aspects of the finance scene in the 1980s. A very active academic literature has developed in recent years on dealing with financial distress and the private and court-supervised mechanisms of resolving default. The purpose of this article is to survey the empirical and theoretical research on (i) managing financial distress, and (ii) valuing corporate securities incorporating payouts in troubled reorganizations. New research on both topics is contained in the nine papers presented in this Financial Distress Special Issue of Financial Management. These papers are also surveyed in the context of related past research.