maturities. The premium depends on risk-neutral leverage effects and the expected future risk-neutral market variance and …

The moral hazard incentives of the bank safety net predict that distressed banks take on more risk and higher leverage … reduce their leverage and decrease observable measures of riskiness, which is inconsistent with the view that, on average …, moral hazard incentives dominate distressed bank leverage and risk-taking policies …

We revisit the relation between equity returns and financial leverage through the lens of a trade-off model with costly … returns depend on whether a firm's leverage is above or below its target leverage. The data support the model predictions …. Controlling for leverage, overlevered (underlevered) firms earn higher (lower) returns. Controlling for target leverage the …

We revisit the relation between equity returns and financial leverage through the lens of a dynamic trade-off model …'s leverage is above or below its target leverage. We provide empirical evidence in support of the model predictions. Controlling … for leverage, overlevered (underlevered) firms earn higher (lower) returns. A quantitative version of our model reproduces …