, Hilscher, and Szilagyi, 2008) and the positive distress risk premium-return relation (Friewald, Wagner, and Zechner, 2014). We … market risk premium in distressed firms; (ii) negative covariance generates low stock returns and negative alphas among those … firms; and (iii) firms with a lower distress risk premium endogenously choose higher leverage, so they are more likely to …

distress-risk but increases growth-leverage and, thus, we test for a U-shaped relation between returns and profitability from …

exposure to macroeconomic risk, and that FD can increase macroeconomic vulnerability. To do this, we first establish three …

While empirical literature has documented a negative relation between default risk and stock returns, the theory … suggests that default risk should be positively priced. We provide an explanation for this "default anomaly", by calculating … components. The systematic part, measured as the PD sensitivity to aggregate default risk, is positively related to stock returns …

average future returns. We show that there is a large overlap between stocks classified as high default risk, and those that … are highly correlated, with over 50% of firms in the top distress risk quintile also in the top quintile of predicted … that the low returns to high distress risk firms are large and significant in ‘speculative' firms (with high sales growth …

Market liquidity is informative of future corporate defaults but in a nuanced way. A firm's probability of default … increases with market illiquidity only when the firm's funding liquidity is tight and/or solvency position is weak. Such …

This paper quantifies the premium demanded by the investors for bearing the corporate default risk. We propose a novel … restrictions provided by a structural model of credit risk. By pinning down the daily dynamics of the market value of debt, we … deliver daily estimates of the full term structure of the default risk premium for worldwide non-financial firms. We show that …

We study the endogenous determination of corporate debt maturity in a setting with default risk. We assume that firms … projects with positive but small net present value, firms may be forced to default in the first phase. We call this liquidity … risk. The technology is such that earnings can switch to a higher (but riskier) level. In this second phase firms have …

, whilst removing credit risk transmission, systematically increase default risk …