Showing 1 - 10 of 1,597
I build a dynamic capital structure model that demonstrates how business-cycle variations in expected growth rates, economic uncertainty, and risk premia influence firms' financing and default policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise...
Persistent link: https://www.econbiz.de/10012462506
an over-the-counter secondary market with search frictions. Bargaining with dealers determines a bond's endogenous … liquidity, which depends on both the firm fundamental and the time-to-maturity of the bond. Corporate default decisions interact … endogenous default worsens a bond's secondary market liquidity, which amplifies equity holders' rollover losses, which in turn …
Persistent link: https://www.econbiz.de/10012460252
We present a dynamic general equilibrium model with agency costs where: i) firms are heterogeneous in the risk of default; ii) they can choose to raise finance through bank loans or corporate bonds; and iii) banks are more efficient than the market in resolving informational problems. The model...
Persistent link: https://www.econbiz.de/10012461679
green bonds and characterize the "green bond boom" witnessed in recent years. Second, using firm-level data on green bonds … bonds. I find that the stock market responds positively to the announcement of green bond issues. Moreover, I document a … certification is an important governance mechanism in the green bond market. I conclude by discussing potential implications for …
Persistent link: https://www.econbiz.de/10012479900
shift from bank finance to bond finance, at a time when the cost of market debt rose above the cost of bank loans. We show …
Persistent link: https://www.econbiz.de/10012457936
for jump-to-default risk. However, these models preclude a "contagion-risk'' channel, where the aggregate corporate bond … even if P-measure contagion across defaults is small. We find empirical support for contagion in bond returns in response …
Persistent link: https://www.econbiz.de/10012462918
Which firms issue equity and debt in domestic and international markets and what happens to their assets, sales, and number of employees? To answer these questions, we assemble a new dataset on firm-level capital raising activity during 1991-2011, which we match with firm attributes for 45,527...
Persistent link: https://www.econbiz.de/10012458331
Higher-beta and higher-volatility equities do not earn commensurately higher returns, a pattern known as the risk anomaly. In this paper, we consider the possibility that the risk anomaly represents mispricing and develop its implications for corporate leverage. The risk anomaly generates a...
Persistent link: https://www.econbiz.de/10012456558
Intuition suggests that firms with higher cash holdings are safer and should have lower credit spreads. Yet empirically, the correlation between cash and spreads is robustly positive and higher for lower credit ratings. This puzzling finding can be explained by the precautionary motive for...
Persistent link: https://www.econbiz.de/10012461663
I propose an implementation of the q-theory of investment using bond prices instead of equity prices. Credit risk makes … corporate bond prices sensitive to future asset values, and q can be inferred from bond prices. The bond market's q performs …
Persistent link: https://www.econbiz.de/10012466202