The authors show that the regulation requiring corporate insiders to disclose their trades ex post creates incentives for informed insiders to manipulate the market by sometimes trading against their information. This allows them to increase their trading profits by maintaining their information...

This article studies how collateral affects bond yields. Using a large data set of public bonds, we document that collateralized debt has higher yield than general debt, after controlling for credit rating. Our model of agency problems between managers and claim holders explains this puzzling...

We investigate the impact of bankruptcy codes on firms' capital-structure choices. We develop a theoretical model to identify how firm characteristics may interact with the bankruptcy code in determining optimal capital structures. A novel and sharp empirical implication emerges from this model:...

We hypothesize that CEO compensation is optimally designed to trade off two types of agency problems: the standard shareholder-management agency problem as well as the risk-shifting problem between shareholders and debtholders. Analyses in this setup produces two predictions: (1) the...

In this paper, we study how risk-shifting incentives and the design of debt covenants are affected by the pattern of temporal resolution of uncertainty (TRU) in the underlying technology of the firm. We show that the extent of risk-shifting as well as the yield demanded on corporate debt are...