This paper develops a quantitative framework for analyzing the impact of macroeconomic conditions on credit risk and dynamic capital structure choice. We begin by observing that when cash flows depend on current economic conditions, there will be a benefit for firms to adapt their default and...

This paper examines the effects of capital gains taxation on firms’ investmentand financing decisions. We develop a real options model in which the timing ofinvestment, the decision to default, and the firm’s capital structure are endogenouslyand jointly determined. Our analysis demonstrates...

This paper develops a tractable real options framework to analyze the eects of asym-metric information on investment and nancing decisions when rms require externalfunds to nance investment. Our analysis shows that corporate insiders can signal theirprivate information to outside investors using...

This paper examines the impact of agency conicts on corporate nancing decisions. Werst build a dynamic contingent claims model in which nancing policy results from a trade-obetween tax benets, contracting frictions, and agency conicts. In our setting, partially-entrenched managers set the rms'...

This paper examines the effects of capital gains taxation on firms’ investmentand financing decisions. We develop a real options model in which the timing ofinvestment, the decision to default, and the firm’s capital structure are endogenouslyand jointly determined. Our analysis demonstrates...

This paper examines the impact of capital gains taxation on firms’ investment and financing decisions. We develop a real options model in which the timing of investment, the decision to default, and the firm’s capital structure are endogenouslyand jointly determined. Our analysis shows that...

This paper develops a real options framework to analyze the behavior of stock returns in mergers and acquisitions. In this framework, the timing and terms of takeovers are endogenous and result from value-maximizing decisions. The implications of the model for abnormal announcement returns are...

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a...

This paper presents a model of executive compensation in which the executive is risk averse and has specific knowledge - knowledge about the optimal actions to take that is costly to transfer to the principal. The model generates predictions that are consistent with the available evidence and...

This paper analyzes the relation between agency conflicts and risk management in a contingent claims model of the firm. In contrast to previous contributions, our analysis incorporates not only stockholder-debtholder conflicts but also managerstockholder conflicts. In particular we consider a...