agencies’ business model, the procyclical behaviour of leverage in much of the financial system and of the Basel capital …

over the period 1982–1999. The recovery rates are measured using the prices of defaulted securities at the time of default … and at the time of emergence from default or from bankruptcy. In addition to seniority and security of the defaulted … securities, industry conditions at the time of default are found to be robust and important determinants of the recovery rates …

We study two-period pure-exchange Capital Asset Pricing Model (CAPM) economies, for given degrees of incompleteness of …

political risk. We focus on two choice variables, the leverage and the ownership structure of the foreign affiliate, and we … analysis we find that, as political risk increases, the ownership share always decreases, whereas leverage can both increase or …

higher leverage if they are privately-controlled and if they are regulated by an independent regulatory agency. Moreover, we … find that the leverage of these firms has a positive and significant effect on their regulated prices, but not vice versa …, and it also has a positive and significant effect on their market values. Our results are consistent with the theory that …

initial leverage ratios but increase both fair credit spreads and expected default probabilities for moderate levels of … their leverage in response to stochastic changes in firm value. It is shown that capital structure dynamics lower optimal … transactions costs. Numerical examples demonstrate that expected default frequencies do not decrease monotonically in the …