This paper develops a quantitative framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and...

This paper examines the impact of capital gains taxation on firms’ investment and financing decisions. We develop a real options model in which the timing of investment, the decision to default, and the firm’s capital structure are endogenouslyand jointly determined. Our analysis shows that...

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a...

The aim of this study is to test whether the relation between the informational content of equity offering announcements and their impact on the firm value depends on the motive of the offering. The use of the proceeds allows differentiating the equity issues according to the theories that...

We test leverage predictions of the trade-off and pecking order models usingSwiss data. At an aggregate level, leverage of Swiss firms is comparativelylow, but the results depend crucially on the exact definition of leverage.Confirming the pecking order model but contradicting the trade-off...

This paper studies the corporate policy distortions caused by realization-based capital gains taxation at the personal level in a dynamic trade-off theory model. The lock-in effect of embedded capital gains creates severe conflicts of interest between incumbent and new investors. The firms...

This model adds to the standard neoclassical model of business fluctuations by introducing a more realistic capital structure problem, where firms have to balance the tax benefits of debt with the costs of potential financial distress. Therefore, firms solve a dynamic problem with both an...