Heroes under distress

Stefan K. Madsen

Student thesis: Master thesis


The following deals with the value of bankruptcy and distress to the ongoing modern capitalist economy. The answer provided is founded in classical economics, theory of the firm, financial theory, and business cycle theory. Furthermore 10 real-life cases are provided. In order to underscore the human element all cases are shown with a portrait of the business man in question. The thesis argue that 1) firms are created by the action of entrepreneurs seeking to turn uncertainty relating to demand into profit, 2) in that they are certain to create knowledge of demand and of optimal resource allocation, since firm closure testify to optimal resource allocation. However; 1) Social indignation of bankruptcy can lead to less opportunity recognition, and 2) government spending and regulation can lead to suboptimal resource allocation, 3) and a false interest rate lead to clusters of entrepreneurial errors.

EducationsMSc in Finance and Strategic Management, (Graduate Programme) Final Thesis
Publication date2009
Number of pages135