We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about how inside debt features affect the relation between credit spreads and compensation components. First, inside debt reduces credit spreads only if it is unsecured. Second, inside...

Recent decades have witnessed several waves of buyout activity. We find LBOs to be a significant concern for bondholders by showing that a) intra-industry credit spreads increase upon an LBO announcement, b) yields on bonds without event risk covenants are, on average, 21bps higher than those on...

In this paper I review the definition of weighted average cost of capital and derive the discount coefficient of the firm's cash flows which preserves linearity of the present value function within each discounting period, i.e. in each discounting period the sum of the present value of each cash...

We examine how accounting-based compensation plans influence a firm's contracts with its creditors. After granting long-term accounting-based compensation plans (LTAPs) to CEOs, firms pay lower spreads and have fewer restrictive covenants in new bank loans. Mechanisms leading to lower borrowing...

Uncertainty about management appears to affect firms' cost of borrowing and financial policies. In a sample of S&P 1500 firms between 1987 and 2010, CDS spreads, loan spreads and bond yield spreads all decline over the first three years of CEO tenure, holding other macroeconomic, firm, and...

We develop a model of managerial compensation structure and asset risk choice. The model provides predictions about the relation between credit spreads and different compensation components. First, we show that credit spreads are decreasing in inside debt only if it is unsecured. Second, the...

We hypothesize that macro-level liquidity affects the choice between tender-mergers and mergers. We employ a novel methodology to test this relationship. This method finds structural breaks in the number of tender-mergers relative to mergers and finds that the structural breaks coincide...

Credit default swaps (CDS) introduce frictions in debt renegotiations because they alter the incentives of creditors insured with CDS to favor bankruptcy instead of restructuring debt out-of-court. Such renegotiation frictions can increase bond spreads by increasing distress resolution costs....

This paper examines which factors determine the pricing of loans for LBOs, using a worldwide sample of 11,111 loans closed in the 2000-2016 period. Our findings are consistent with the hypothesis that loans for LBOs are priced differently by common factors than other syndicated loans. We show...

In this paper, we examine the effect of shareholder governance mechanisms on the firms' credit risk through credit default swap spreads. Our results suggest that higher antitakeover provisions decrease the price of debt. We find that on average, addition of one antitakeover provision lowers the...