This paper provides evidence for a causal effect of equity prices on corporate investment and employment. We use fire sales by distressed equity funds during the 2007--2009 financial crisis to identify substantial exogenous underpricing. Firms whose stocks are most underpriced have considerably...

The early stage of the recent ?financial crisis was marked by large value losses for bank stocks. This paper identifies the equity funds most affected by this valuation shock and examines its consequences for the non-financial stocks owned by the respective funds. We find that (i) ownership...

The early stage of the 2007-08 financial crisis was marked by large value losses for bank stocks. This paper identifies the equity funds most affected by this valuation shock and examines its consequences for the nonfinancial stocks owned by the respective funds. We document three key empirical...

In this paper, we examine the behavior of stock prices of individual firms with different bond ratings surrounding the October market crash of 1987 and therefrom make inferences about the significance of bankruptcy costs borne by stockholders. The key findings are as follows: Immediately...