are positively related to credit risk, resulting in a positive correlation between cash and spreads. In contrast, spreads … are negatively related to the "exogenous'' component of cash holdings that is independent of credit risk factors … liquidity may be related positively to the longer-term probability of default. Our empirical analysis confirms these predictions …

When a sovereign faces the risk of debt default, it may be tempted to expropriate the private sector. This may be one … reason for why international investment in private companies has to take into account the sovereign risk. But the likelihood … of a transfer from the sovereign risk to corporate default risks may be mitigated by legal institutions that provide …

This paper models a firm's rollover risk generated by conflict of interest between debt and equity holders. When the … market liquidity and shorter debt maturity can exacerbate this externality and cause costly firm bankruptcy at higher … fundamental thresholds. Our model provides implications on liquidity-spillover effects, the flight-to-quality phenomenon, and …

This paper studies the interaction between fundamental and liquidity for defaultable corporate bonds that are traded in … liquidity, which depends on both the firm fundamental and the time-to-maturity of the bond. Corporate default decisions interact … with the endogenous secondary market liquidity via the rollover channel. A default-liquidity loop arises: Earlier …

betas, and loadings on value and small-cap risk factors than stocks with a low risk of failure. These patterns hold in all … size effects are compensation for the risk of financial distress …

This paper employs a novel multi-country dataset of corporate defaults to develop a model of distress risk specific to … emerging markets. The data suggest that global financial variables such as US interest rates and shifts in global liquidity and … risk aversion have significant predictive power for forecasting corporate distress risk in emerging markets. We document a …

We develop a structural credit risk model to examine how the interactions of liquidity and default risk affect …, our model generates rich links between liquidity risk and default risk. The introduction of macroeconomic risks helps the … model capture realistic time variation in default risk premia and the default-liquidity spiral over the business cycle …

components in corporate spreads. We find that the majority of the corporate spread is due to default risk. This result holds for …-market liquidity …

different amounts of loan because of differences in their time or risk preferences (types). Thus, the unconditional probability …