We examine how information asymmetry affects a firm's incentive to hedge versus speculate by using foreign currency derivatives. We find a quadratic relation between asymmetric information and a firm's risk management activities. In particular, we find that the firms facing medium level of...

Firms with higher board independence, smaller boards, and lower expected managerial entrenchment, have lower cash holdings. We find that the positive association between cash holdings and managerial entrenchment is mitigated by stronger board structures. Specifically, in firms with higher...

Divestitures have the potential to create shareholder value. However, the magnitude of the wealth effect depends on the likelihood of finding more valuable uses for the divested assets and the seller's ability to eliminate negative synergies. Strong performers should have less scope to benefit...

Extant research argues that borrowing from financial intermediaries subjects managers to external monitoring. However, given managers' flexibility in choosing the type of debt financing, why would managers submit themselves to external monitoring? Recent theory points to the role of managerial...

This research separates out the incentive and entrenchment effects of executive pay and uses it to test if the agency cost is that of underinvestment or overinvestment. I find that investments increase with dollar value of stock and options owned by the CEO but decrease with percentage of shares...

Overwhelming evidence indicates that firms time market conditions to issue equity. I investigate the motivations for security issuances in hot and cold markets. While it is commonly believed that firms tend to exploit overvaluations to issue equity and overinvest in so-called 'hot' markets,...

We examine the ex-ante performance of 1185 firms that filed for bankruptcy between 1992 and 2009. Evidence suggests that firm specific poor operating performance and industry wide distress are the principal causes (contributing 42% each for cash flow shortfall) of corporate distress. We observe...

Since its publication, the seminal structural model of default by <xref ref-type="bibr" rid="B45">Merton (1974) has become the workhorse for gaining insights about how firms choose their capital structure, a “bread and butter” topic for financial economists. Capital structure theory is inevitably linked to several...</xref>