Using local natural disasters as a quasi-experimental setting, we show that heightened distress risk in shocked firms drives both these firms and their unshocked competitors to cut profit margins by about 0.8 percentage points. These reductions stem from predatory pricing, inventory liquidation,...

Secured lenders have recently demanded a new condition in distressed debt restructurings: competing secured lenders must lose priority. We model the implications of this "creditor-on-creditor violence" trend. In our dynamic model, secured lenders enjoy higher priority in default. However,...

In an RCT with US small businesses, we document that a large share of firms are not well-informed about bankruptcy. Many assume that bankruptcy necessarily entails the death of a business and do not know about Chapter 11 bankruptcy, where debts are renegotiated so that the business can continue...

We examine the desirability of granting "safe harbor" provisions to creditors of financial intermediaries in sale-and-repurchase (repo) contracts. Exemption from an automatic stay in bankruptcy enables financial intermediaries to raise greater liquidity and induces entry of intermediaries with...

This paper examines the movements of the Distance to Default (DD), a market-based measure of corporate default risk, of eight failed Japanese banks in order to evaluate the predictive power of the DD measure for bank failures. The DD became smaller in anticipation of failure in many cases. The...

We propose a statistical model of differences in beliefs in which heterogeneous investors are represented as different machine learning model specifications. Each investor forms return forecasts from their own specific model using data inputs that are available to all investors. We measure...

We investigate how firms manage financial default risk (on debt) and operational default risk (on delivery obligations). Financially constrained firms reduce operational hedging through inventory and supply chain in favor of cash holdings. Our model predicts that firms' markup increases with...

Secured debt--a debt contract that offers security to creditors in the form of collateralized assets--has been a cornerstone of credit markets in most societies since antiquity. The ability to seize and sell collateral reduces the creditor's expected losses when the debtor defaults on a promised...

In this paper, we assemble the most comprehensive dataset to date on the characteristics of colleges and universities, including dates of operation, institutional setting, student body, staff, and finance data from 2002 to 2023. We provide an extensive description of what is known and unknown...

The potential for portfolio diversification is driven broadly by two characteristics: the degree to which systematic risk factors are correlated with each other and the degree of dependence individual firms have to the different types of risk factors. Using a global vector autoregressive...