In this study we theoretically simulate default risk scenarios under various economic noises. We find that firms … liquidation more swiftly even for firms with higher risk tolerance, counter-cyclical economic movements reduces default risk for …

characteristics we show that PE-backed companies do not carry more insolvency risk than other (distressed) companies and other buyout … set comprising the population of over eight million company year observations and 153,000 instances of insolvency covering … formal insolvency proceedings than other firms and how this varies over the economic cycle. Controlling for size, age, sector …

We study the endogenous determination of corporate debt maturity in a setting with default risk. We assume that firms … risk. The technology is such that earnings can switch to a higher (but riskier) level. In this second phase firms have … access to the equity market but they may default if this is the best option. We call this strategic default risk. In the …

, 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 …

We document the negative effect of stock liquidity on default risk for a sample of 46 countries. We further find that … default risk declines following the introduction of the Directive on Markets in Financial Instruments (MiFID)—an exogenous … shock that increases liquidity. The effect of liquidity on default risk is more pronounced in countries with poorer investor …

-levering procedure is around for the case of risk-free debt. The procedure for risky debt is much less clear even under very simplifying …

parameter, can distort asset pricing results through distress risk estimation, and that the existing academic debate between … results, based on (i) raw and risk-adjusted portfolio returns, (ii) characteristic sorted portfolio returns, and (iii) cross …

An important research question examined in the credit risk literature focuses on the proportion of corporate yield … spreads attributed to default risk. This topic is reexamined in the light of the different issues associated with the … estimated default risk proportion in corporate yield spreads is highly sensitive to the ex-ante estimated term structure of …

firms with lower profitability and more long term liabilities and lower liquidity are more in Risk of financial distress. To … reduce financial distress risk, firms should use more conservative methods which lead to decrease in debts and reduce their …