by introducing a variable “policy-risk-induced equity return” (PRER). The results show that it is the equity market that … negatively (positively) the leverage target, conforming to the market-timing theory. EPU and non-policy uncertainty shocks cause …

interaction between firm-level heterogeneity and general equilibrium effects. Following a contractionary financial shock … cancels out the financial shock's direct effect in aggregation. If the firm-level heterogeneity is removed, the implied …

persistent negative productivity shock signals low future income and prompts firms to hold more cash in order to preserve …

We develop and estimate a dynamic model of risk-shifting over the business cycle. First, equity holders with Epstein …-Zin preferences increase their taking of idiosyncratic risk substantially more than the standard model in repeated games, because they … "synchronized'' idiosyncratic risk. Third, combined with high market risk premium in the bad states, the clustered risk …