We consider the role of construction lags or time-to-build (TTB) in a firm's dynamic investment and financing decisions. We conjecture that construction lags can lead firms to finance large projects with equity so as to maintain financial flexibility during the construction period. After project...

We introduce the concept of the post-merger integration duration (PMID) which is the time delay that it takes a merged entity to fully capture synergistic gains. Using a dynamic model, we examine the effects of this duration on acquiring firms' financing behavior around mergers. When facing a...

This paper examines information and incentive problems that can exist in the market for conduit mortgages, which are commercial mortgages placed in pools that are repackaged and sold as CMBS. We find that conduit mortgages that are originated by institutions with negative stock price performance...

I examine the effect of investment frictions on leverage dynamics, using a model of the firm whose investments are 1) indivisible and lumpy, and 2) subject to time-to-build, which is a time lag between when investment expenditures are made and when the investment begins to generate cash. The...

This paper presents a continuous time model of a firm that can dynamically adjust both its capital structure and its investment choices. The model extends the dynamic capital structure literature by endogenizing the investment choice as well as firm value, which are both determined by an...

We use a structural model to examine whether make-whole call provisions - a recent yet surprisingly common innovation in corporate debt markets - are fairly priced at origination. The call provision cost is calculated as the callable bond yield minus the equivalent non-callable bond yield,...

Recent research shows that mood and attention may affect investors' choices. In this paper we examine whether companies can create such mood and attention effects through advertising. We choose a natural experiment by investigating price reactions and trading activity for firms employing TV...

We present and test an infinite-horizon, continuous-time model of a firm that can dynamically adjust the use of risk management instruments whose purpose is to reduce product price uncertainty thereby mitigating financial distress losses and reducing taxes. The dynamic setting relaxes several...

We model dynamic bank capital structure under three optimally-designed regulatory regimes dealing with potential default { bailout, where government provides capital; bail-in, using private-sector funds; and no regulatory intervention, allowing failure. Only under optimally designed bail-in do...

This paper develops a structural model that determines default spreads on risky debt. In contrast to previous research, the value of the debt's collateral is endogenously determined by the borrower's investment choice, as well as by a market demand variable that has permanent as well as...