Using a multi-period valuation model, we examine the impact of market misvaluation on the firm's choice of security for funding the financing deficit. We find that firms which appear to be overvalued relative to previous years, fund a greater proportion of their deficit with equity rather than...

We find that equity mispricing impacts the speed at which firms adjust to their target leverage and does so in predictable ways depending on whether the firm is over- or underlevered. For example, firms that are above their target leverage and should therefore issue equity (or retire debt),...

In response to the recent financial crisis, the U.S. Government introduced new rules which allow REITs to issue elective stock dividends (ESD) to satisfy their distribution requirements. The goal of these rules was to provide temporary relief to REITs facing cash flow problems. We investigate...

In this paper, we examine the relative explanatory power of three motivations for firms to remain debt free - managerial entrenchment, need for financial flexibility, and credit constraints. Consistent with the hypothesis that they lack access to debt markets, these firms are small, young,...

This paper presents evidence that firms conserve cash to manage employees' perceptions of the risk of becoming unemployed. Employing a matched sample design and using state level changes in unemployment insurance (UI) benefits to proxy for unemployment risk, we test the hypothesis that cash...

U.S. firms lease assets extensively. We find that, during 1980–2011, the average U.S. firm has a lease intensity of about 40%. Or, the average firm has present and future (up to five years) rent commitments equal to 16.6% of their total assets. We investigate whether agency costs between the...

This paper examines the impact of debt covenants on the speed of capital structure adjustment. Overall, we find that covenants lower the speed of adjustment by 10–13%, relative to the speed of adjustment of firms without covenants. The speed of adjustment is significantly lower, by 40–50%,...

This paper comprehensively examines whether the presence of interlocked directors on a board is associated with weak governance. For a sample of 3,566 firm-years over the 2001-2003 time period, we find that firms with lower industry-adjusted firm performance are more likely to have interlocked...

We investigate the impact of failures-to-deliver on the performance of 116 Real Estate Investment Trusts (REITs) during a period of substantial short selling (calendar years 2007 and 2008). REIT shares typically are easy to borrow, have high transparency (low information asymmetry), and are...