Balancing Shareholder Value and Financial Stability under a Reduced-Form Liquidation Model
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摘要
This paper develops a continuous-time, three-zone surplus model with state-dependent liquidation intensity to study how distress-resolution design shapes the trade-off between shareholder value and financial stability. We show that a distress recovery buffer below insolvency and a no-dividend solvency band above a threshold, when combined, can yield a Pareto improvement over immediate liquidation, whereas either feature alone may improve one objective at the expense of the other. The optimal dividend policy is a barrier strategy; we derive a tractable computation method via a system of linear ODEs to obtain the value function and the expected survival time, enabling cost-efficient comparison across regulatory designs [page::0].
