Companies' investments in research and development (R&D) are usually associated with better growth opportunities incorporated in the firms' market valuation. This study focuses on the question how does the firms' market value attributable to R&D investments depend on the firms' ability to employ...

A common method of valuing the equity in leveraged transactions is the flows-to-equity method whereby the free cash flow available to equity holders is discounted at the cost of equity. This method uses a standard definition of equity free cash flow, but the cost of equity varies over time as...

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...

We identify local and global factors across international bond markets that arepoorly spanned by the traditional level, slope and curvature factors but havestrong forecasting power for future bond excess returns. Local and global fac-tors are jointly signicant predictors of bond returns, where...

In this paper, we consider an incomplete market framework and explain how to use jointly observed prices of the underlying asset and of some derivatives written on this assetfor an efficient pricing of other derivatives. This question involves two types of moment restrictions, which can be...

International evidence on the accrual anomaly is sparse and conflicting. Testing for accrual mispricing in 28 equity markets, we provide statistical evidence for anomalous returns in some countries. However, we question whether this result might have occurred by chance alone and that it might...

Using a new data set of small public firms in Germany, this paper analyzes the incentive and entrenchmenteffects associated witrh mangerial equity owernership. The relationship between firm value and insider ownership is found to be nonlinear: at low levels of ownership firm value is positive...

This paper tests two competing hypotheses about the influence of financial institutions as large shareholders on the performance of their industrial portfolio firms: the superior monitoring hypothesis versus the rent extraction hypothesis. The methodology of this study exploits the abolishment...

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 studies the impact of cash constraints on equilibrium research intensities in a patent race between a current owner of the “state of the art” technology (the incumbent) and entrants. We develop a simple model, where players need to raise funds from imperfectly informed creditors to...