Thesis (Ph. D.)--University of Texas at Austin, 2001. / Vita. Includes bibliographical references (leaves 232-244). Available also in an electronic version.

Thesis (Ph. D.)--University of Texas at Austin, 2001. / Vita. Includes bibliographical references. Available also in a digital version from UMI/Dissertation Abstracts International.

Inaugural dissertation--Rostock. / "Literatur": p. [5]-8.

Thesis, Rostock.

Thesis, Rostock.

Inaugural dissertation--Rostock. / "Literatur": p. [5]-8.

Inaug.-diss.--Munich. / "Literaturverzeichnis": p. [vii]-viii.

Empirical evidence shows that the Capital Asset Pricing Model (CAPM) is misspecified. Securities of low systematic risk consistently earn more than predicted by the model, the reverse being true for securities of high systematic risk. Whilst the relationship between ex-post returns and systematic risk appears to be linear, the estimated regression coefficients are significantly different from their theoretic values. Various attempts to explain theoretically the causes of the misspecification have been explored, but fail to provide an adequate explanation of all the observed deficiencies. The dissertation examines how the mechanism of bankruptcy affects the structure of returns for corporate financial assets. The hypothesis of the thesis is that the probability of bankruptcy across securities and across time is reflected in the residual return after abstracting from the market. Using stochastic control theory, a two variable extended form of the continuous time analogue of the CAPM is derived. The second variable is associated with the probability of bankruptcy. The model provides a natural explanation of the deficiencies of the CAPM. A discrete time ex-post formulation of the model is used to test empirically the hypothesis. This necessitates being able to measure the probability of bankruptcy. A model formulated in terms of a firm's ability to raise funds, either internally or externally, to cover fixed charges is developed, and the probability of bankruptcy estimated using the maximum likelihood methodologies of logit analysis and probit analysis. The ability of the model to predict bankruptcy is tented on a secondary sample of bankrupt firms. Excellent results are obtained with the model predicting bankruptcy, for some firms, four or five years before the actual occurrence. Using a pooling of time series and cross section data to estimate the coefficients of the regression equation representing the hypothesis, evidence is found indicating that bankruptcy is an explanatory factor of common stock returns. / Business, Sauder School of / Graduate

Although the Federal Government is granted authority over bankruptcy law through the U.S. Constitution (Article 1, section 8), the Federal Government has historically left bankruptcy law for state governments to enact. In 1978, the U.S Congress tried to create a national bankruptcy law, but a last minute compromise allowed states to override federal law in key areas such as Chapter 7 exemption types and amounts. Since the 1978 law was enacted, all states have overridden the law to some extent. Although the original 1978 law has undergone several revisions, the basic structure of the law with state control over certain provisions remains the same. Because the Chapter 7 exemptions affect the cost of bankruptcy for the debtor, this paper develops a state level probability model to determine whether the different state exemption amounts affect the probability of filing for bankruptcy. The paper shows that states with more lenient exemption laws will incur a higher bankruptcy rate after controlling for socioeconomic and economic conditions that may create higher bankruptcy frequencies. / Master of Arts

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