Many previous studies document a positive relation between research and development (Ramp;D) and equity value. Though Ramp;D can increase equity value by increasing firm value, it can also increase equity value at the expense of bondholder wealth through an increase in firm risk because equity...

Previous studies ignore the fact that employee stock options are warrants because these options have been an insignificant component of firms' capital structures. I show that this assumption is no longer correct. For example, for more than 36 percent of my sample firms, employee stock options...

Many studies use the book value of debt as a proxy for its market value because most corporate debt does not trade. I call this practice the book value of debt (BVD) approximation, and it appears to be justified by the observation that the average market value of debt is close to its book value....

Departures from the absolute priority rule (APR) in Chapter 11 bankruptcy proceedings have been of great interest to finance scholars throughout the 1990s. In a recent article, Beranek, Boehmer, and Smith (1996, BBS) criticize three of the early articles in this area Franks and Torous (1989),...

<heading id="h1" level="1" implicit="yes" format="display">ABSTRACT</heading>Many previous studies document a positive relation between research and development (R&D) and equity value. Though R&D can increase equity value by increasing firm value, it can also increase equity value at the expense of bondholder wealth through an increase in firm risk because equity...

We examine a sample of 8,313 cases, between 1951 and 2001, where firms unexpectedly increase their research and development (R&D) expenditures by a significant amount. We find consistent evidence of a misreaction, as manifested in the significantly positive abnormal stock returns that our sample...