We study risk and return properties of capital structure arbitrage strategies aiming to profit from temporal mispricing between equity and credit default swaps (CDSs) of companies. We find that capital structure arbitrage provides an attractive annualized return of 24.35% on invested capital....

How does entrepreneurial financing differ from traditional financing? This study sheds new light on this central question of entrepreneurial finance literature by exploring the distinctive role of soft information in a high-tech start-up’s debt financing. Entrepreneurial investors can obtain...

This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance...

This paper surveys the literature on the linkages between asset prices and macroeconomic outcomes. It focuses on three major questions. First, what are the basic theoretical linkages between asset prices and macroeconomic outcomes? Second, what is the empirical evidence supporting these...

The general view underlying bank regulation is that bank disclosures provide market discipline and reduce banks’ risk-taking incentives. We show that bank disclosures can increase bank leverage and bank risk. The reason stems from the interaction between insured and uninsured debt. Bank...

We study the trading behavior of retail investors in the market of leveraged bank-issued retail derivatives designed to trade excessively, speculate and gamble on ongoing trends and market movements. We analyze whether retail investors have private information and benefit disproportionately or...

During a financial crisis, when markets most need liquidity and arbitrage tradings, hedge funds often reduce their exposures and positions. The paper explains this phenomenon in light of coordination risk. We argue that the fragile nature of capital structure of hedge funds, combined with low...

We show that small firms using syndicated loans for their mid- and long-term financial needs have significantly higher leverage than firms that do not borrow in this market. This difference cannot be attributed to firm characteristics like the availability of growth opportunities, asset...

This study investigates the relationship between leverage ratios and bank share performance for a sample of Japanese banks during the period of financial crisis in the late 1990s. We differentiate between two types of leverage ratios: book leverage and market leverage. We show that market...

The study empirically investigates two theories that claim to explain the low-risk effect in Indian equity markets using a universe of stocks listed on the National Stock Exchange of India (NSE) from January 2000 to September 2018. Leverage constraints and preference for the lottery are two...