Direct costs of bankruptcy are measured for a sample of firms in the trucking industry that petitioned for bankruptcy protection from 1970 to 1985. Average direct bankruptcy costs represent 9.12 percent of the book value of total assets as of the year before filing. These costs are large...

Previous studies of bid-ask spread estimators based on serial covariance in returns document high proportions of positive serial covariances and therefore negative spread estimates. These findings may be due to the effects of time-variation in expected returns. Although purging the effects of...

Common stock price reactions to announcements of sixty-seven calls of the in-the-money convertible preferred stocks are examined, and a significant average abnormal return of -1.6 percent is documented. The finding is robust to the choice of estimation period and the assumed return-generating...

We undertake a comprehensive test of several contingent claim valuation models adapted to callable, convertible preferred stocks employing a sample of twenty-four issues and over 27,000 daily price observations. To our knowledge, no large-scale tests of these models have been published. The most...

Negative stock price reactions to conversion-forcing calls of convertible bonds and preferred stocks are reexamined and most of the sample firms are shown to exhibit full price recovery by the end of the conversion period. In addition, analysts' earnings forecasts, both short-term and long-term,...

We examine stock price reactions to announced calls of in-the-money warrants and find a significant average devaluation in excess of 4 percent, consistent with the recent literature. We test theoretical predictions based on asymmetric information, agency costs, and corporate control in a...

Compensation contracts of chief executive officers of large firms typically provide for a low linkage between compensation and stock performance. We test predictions of various theoretical models of managerial behavior using pay-performance sensitivity measures. We find that even though the...