Ensuring that a firm has sufficient liquidity to finance valuable projects that occur in the future is at the heart of the practice of financial management. Yet, while discussion of these issues goes back at least to Keynes (1936), a substantial literature on the ways in which firms manage...

This paper analyzes whether the financial distress of a firm affects the investment decisions of non-distressed competitors. On average, firms in distress impose indirect costs to non-distressed competitors by increasing costs of credit in the industry and hence restricting credit access and...

This study shows that the 2007-2008 financial crisis and the resulting dislocation in capital markets have notably differential impacts on firms according to their internal/external finance dependence. We find evidence of capital reallocation across firms during the financial crisis: firms...

When forming an investment portfolio there are two effects influencing its not systematic risk. And if the first of them – diversification – is well studied, the second – an inequality of specific risk of components of a portfolio – remained on the periphery. In works and by the...

We examine how a firm's operational slack is associated with current income and future stock price crash risk. By doing so, we test the validity of a firm's alternative motivations for holding operational slack. We show that Supply Chain Slack, which is based on excess working capital, is...

We develop a dynamic theory of capital structure, liquidity and risk management, and payout policies for a financially constrained firm under incomplete markets. In addition to costly external equity financing, the key friction we emphasize is limited financial spanning. We show that the...

We estimate a structural model of bank portfolio lending and find that the typical U.S. community bank reduced its business lending during the global financial crisis. The decline in business credit was driven by increased risk overhang effects (consistent with a reduction in the liquidity of...

This paper studies the long-run effects of credit market disruptions on real firm outcomes and how these effects depend on nominal wage rigidities at the firm level. I trace out the long-run investment and growth trajectories of firms which are more adversely affected by a transitory shock to...

This paper reconciles the two explanations of a financial crisis, the self-fulfilling prophecy and the fundamental causes, in an empirically-relevant framework, by explicitly modeling the costly voluntary acquisition of information about fundamentals in a variant of Diamond and Dybvig (1983). In...