Using a large sample of bank loans issued to U.S. firms between 1990 and 2004, we find that lower takeover defenses (as proxied by the lower G-index of Gompers, Ishii, and Metrick 2003) significantly increase the cost of loans for a firm. Firms with lowest takeover defense (democracy) pay a 25%...

As an alternative to the pecking order, we develop a dynamic calibratable model where the firm avoids mispricing via signaling. The model is rich, featuring endogenous investment, debt, default, dividends, equity flotations, and share repurchases. In equilibrium, firms with negative private...

We take a simple q-theory model and ask how well it can explain external financing anomalies, both qualitatively and quantitatively. Our central insight is that optimal investment is an important driving force of these anomalies. The model simultaneously reproduces procyclical equity issuance...

In this paper we examine the effects 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 endogenously and jointly determined. Our analysis...