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The aim of this paper is to examine whether shareholders consider the EU Emissions Trading Scheme (EU ETS) as value-relevant for the participating firms. An analysis is conducted of the share prices changes as caused by the first publication of compliance data in April, 2006, which disclosed an over-allocation of emission allowances. Through an event study, it is shown that share prices actually increased as a result of the allowance price drop when firms have a lower carbon-intensity of production and larger allowance holdings. There was no significant value impact from firms' allowance trade activity or from the pass-through of carbon-related production costs (carbon leakage). The conclusion is that the EU ETS does 'bite'. The main impact on the share prices of firms arises from their carbon-intensity of production. The EU ETS is thus valued as a restriction on pollution.
We present evidence on the efficiency of the resolution of financial distress in bankruptcy in The Netherlands. Direct costs average 16%, firm recovery 37% and bank debt recovery 80%. The direct costs are lower in larger firms and in firms with more bank debt. Costs increase with the time it takes to sell assets. Firm recovery is influenced by asset structure, capital structure and to a lesser extent Dutch legal variables. However, the opportunity to continue operations in bankruptcy is chosen by about half the firms and this has a positive effect on recoveries.
We study the restructuring process of small and medium-sized firms in financial distress. We have a unique dataset with firms in the Netherlands that are guided in their restructuring effort by banks. Part of our dataset consists of firms that successfully restructure their operations and obligations with the help of their bank. Another part consists of firms that, despite the assistance of their bank, did not succeed in reorganizing their operations and finances. Our empirical test predicts success and failure in restructuring. We find that banks guide firms in their restructuring effort and that their assistance is of crucial importance to the success of the restructuring. However, some firms do not benefit from this assistance, because firms need to be prepared to undertake radical operational changes before bank assistance is forthcoming.
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