The Debate: Corporate Bailouts versus Bankruptcy - Which is Better?

This discussion post supports corporate bailouts over bankruptcy, arguing that bailouts are crucial for reviving failing financial systems and preventing the negative consequences associated with bankruptcy, such as inefficiencies and corporate problems. The author cites examples of government bailouts and emphasizes that bankruptcy does not effectively address financial distress, potentially leading to critical spillover impacts. The post includes references to support these arguments and advocates for financial firms to avoid corporate bankruptcy in favor of government-supported bailouts. Desklib offers a platform for students to access similar solved assignments and study resources.

Running head: CORPORATE BAILOUT 1
Corporate Bailout
Student’s Name
Institutional Affiliation

CORPORATE BAILOUT 2
For this argument, I chose the red side and I sincerely support corporate bailouts than the
corporate bankruptcy. The corporate bailout has become very common in the entire world (Blau,
Brough & Thomas, 2013). I view corporate bailout as a situation in which the falling
corporations are saved from being bankruptcy through the infusion of capital, especially, by the
government. For instance, we have seen the US government bail out the automakers, investment
banks, and banks. I suggest that bailouts should be reserved as it is important since bankruptcy is
a major threat to financial institutions. Actually, there is a segment of the society that supports
the bailout of any firm (Bernardo, Talley & Welch, 2016). The bailout can be in a form of a
bond, stock, loan, or cash and may require reimbursement. In reviewing the history of the
connection that prevails between bailout and financial institutions, it is clear that bailout out will
always help revive a financial system which is falling. Therefore, I feel that we should not expect
the government think differently in the future but support it towards funding bailout program.
On the other hand, I do not support corporate bankruptcy as it is connected to various
risks. I have reviewed various studies which show that bankruptcy is connected to inefficiencies
as well as conflicts which every firm must evade. Through bankruptcy, the go9vernment may as
well experience corporate problems which may result in failure in case bailout is ignored.
Evidently, corporate bankruptcy does not help in addressing financial distress as in the case of a
corporate bailout. Also, in case a company is facing the issue of liquidity and default, it is
expected that the company will experience critical spillover impacts (Wang, Ma & Yang, 2014).
Therefore, I urge every financial firm to consider corporate bankruptcy and assume corporate
bankruptcy as it is not beneficial in any way.

CORPORATE BAILOUT 3
References
Bernardo, A. E., Talley, E. L., & Welch, I. (2016). Designing corporate bailouts. The Journal of
Law and Economics, 59(1), 75-104.
Blau, B. M., Brough, T. J., & Thomas, D. W. (2013). Corporate lobbying, political connections,
and the bailout of banks. Journal of Banking & Finance, 37(8), 3007-3017.
Wang, G., Ma, J., & Yang, S. (2014). An improved boosting based on feature selection for
corporate bankruptcy prediction. Expert Systems with Applications, 41(5), 2353-2361.