Direct costs of financial distress

Direct costs of financial distress

Costs such as fees or penalties incurred as a result of bankruptcy or liquidation proceedings.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Direct Costs of Financial Distress

Any fees or penalties that result from a bankruptcy or liquidation. An obvious example is the fee one must pay to a bankruptcy attorney. However, other fees, perhaps broker fees resulting from the liquidation of stock, may also be attached.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved
References in periodicals archive ?
Reexamining the direct costs of financial distress is important because many debt restructurings in the late 80s and early 90s involved prepackaged bankruptcy, failed HLTs, vulture investors, and informal pre-restructuring bondholder committees.
(1993) argue that smaller firms are more likely to hedge than larger firms, because the direct costs of financial distress are less than proportional to firm size.
I first examine the direct costs of financial distress and the actions that the sample firms take to minimize the indirect costs of financial distress.