We show that the partial response of loan rates to interest rate changes, referred to in the bank lending literature as “stickiness,” is a feature of perfect capital markets. No-arbitrage models of credit risk are able to replicate empirical interest rate sensitivities. However, the...

We study the performance of collateralized loan obligations (CLOs) to understand the market imperfections giving rise to these vehicles and their corresponding economic costs. CLO equity tranches earn positive abnormal returns from the risk-adjusted price differential between leveraged loans and...

We study the performance of collateralized loan obligations (CLOs) to understand the market imperfections giving rise to these vehicles and the corresponding costs. CLO equity tranches earn positive abnormal returns from the risk-adjusted price differential between leveraged loans and CLO debt...

Using a novel dataset of accounting and market information that spans most publicly traded firms over the last century, we show that government deficit financing crowds out nonfinancial corporate debt financing and investment. Specifically, an increase in the supply of treasury debt is...

We show that variation in short-term nominal interest rates produces an endogenous response in the design of and commitment to corporate loan contracts. Interest rates are negatively related to the cash flow rights and positively related to the control rights granted to creditors. An implication...

We show that variation in short-term nominal interest rates produces an endogenous response in the design of and commitment to corporate loan contracts. Interest rates are inversely related to the cash flow rights and positively related to the control rights granted to creditors. An implication...