A common method of valuing the equity in highly leveraged transactions is the flows-to-equity method. When applying this method various formulas can be used to calculate the time-varying cost of equity. In this paper we show that some commonly used formulas are inconsistent with the assumptions...

We document a curious feature of the German mutual fund industry. Unlike U.S. mutual funds, funds domiciled in Germany do not necessarily compute their net asset values (NAV) as of market close. Using a sample of German equity funds, we infer each fund's NAV closing time from the best-fit market...

Traditional liquidity measures can provide a false impression of the liquidity and stability of financial market trading. Using data on auctions (bids wanted in competition; BWICs) from the collateralized loan obligation (CLO) market, we show that a standard measure of liquidity, the effective...

The effective functioning of the municipal bond market is crucial for the provision of public services, as it is the largest capital market for state and municipal issuers. Prior research has documented tax, credit, liquidity, and segmentation effects in municipal bonds. Recent regulatory...

Using a sample of S&P 500 firms between 2013 and 2017, we study the impact of ESG rating disagreement on stock returns. We conjecture that for disagreement about environmental ratings, a risk-based explanation induces a positive relationship between rating disagreement and stock returns. In...

We solve the problem of optimal securitization for an issuer facing heterogeneous investors with arbitrary time and risk preferences. We show that the optimal securitization is characterized by multiple nonlinear tranches, and each investor gets a portfolio of these tranches. In particular, when...

Between 1999 and 2007, WR Hambrecht has completed 19 IPOs in the U.S. using an auction mechanism. We analyze investor behavior and mechanism performance in these auctioned IPOs using detailed bidding data. The existence of some bids posted at high prices suggests that some investors (mostly...

We study optimal securitization of defaultable assets in a continuous time setting. A financial intermediary can create a portfolio of defaultable assets and then sell it to outside investors. The default risk of the assets in the portfolio is determined by the unobservable costly effort exerted...

We develop a model of investment, payout, and financing policies in which firms face uncertainty regarding their ability to raise funds and have to search for investors when in need of capital. We show that capital supply uncertainty leads firms to value financial slack and to adjust their...

Modern corporations use complex debt instruments and pursue acquisitions. In order to analyze the properties of some of these contracts in the event of an acquisition, this paper considers a company that has an incumbent capital structure, comprising one of five practically important structured...