We explore the role of expected cash-flow volatility as a determinant of dividend policy both theoretically and empirically. Our simple one-period model demonstrates that, given the existence of a stock-price penalty associated with dividend cuts, managers rationally pay out lower levels of...

In the presence of inflation, the standard Constant-Growth valuation model found throughout the finance literature is not valid in cases where a company either (1) makes no net new investments or (2) invests only in zero Net Present Value projects. If expected inflation is positive, the...

This paper provides a detailed examination of the cost imposed by thrift institutions resolved during the period 1980-88. A simple model is presented to explain the cost of resolution. This model is tested empirically with a comprehensive data set that permits us to avoid some of the econometric...

In this paper we ask the empirical question are bond covenants priced? Consistent with the Costly Contracting Hypothesis (CCH) developed by Smith and Warner (1979), we find that they are. We document a negative relation between the promised yield on corporate debt issues and the presence of...

The claim that lawyers act as gatekeepers or certifiers in financial transactions is widely discussed in the legal literature. There has, however, been little empirical examination of the claim. We test the hypothesis that law firms have replaced investment banks as the gatekeepers of the market...

A substantial portion of the slowdown in productivity and economic growth in the seventies and eighties cannot be ascribed to traditional factors. We have found one potential additional source: the dramatic growth in the scale of government. Employing a theoretical model of output growth, we...

We investigate business cycle dynamics for 26 countries, estimating a set of nonlinear models for real GDP where appropriate. We find a great deal of heterogeneity in the dynamics of real output growth across countries. At the same time, a common feature is the asymmetric response of real GDP to...