Financial contracts that mitigate incentive conflicts between firms and their creditors have a large impact on employees. Using a regression discontinuity design, we provide evidence that there are sharp and substantial employment cuts following loan covenant violations, when creditors gain...

In the decade following the financial crisis of 2008, investment funds in corporate bond markets became prominent market players and generated concerns of financial fragility. The COVID-19 crisis provides an opportunity to inspect their resilience in a major stress event. Using daily microdata,...

This paper uses detailed high-frequency regulatory data to evaluate whether trading increases or decreases systemic risk in the U.S. banking sector. We estimate the sensitivity of weekly bank trading net profits to a variety of aggregate risk factors, which include equities, fixed-income,...

The widespread and growing use of equity-based compensation has transformed high-skilled labor from a pure labor input to a class of "human capitalists." We show that high-skilled labor earns substantial income in the form of equity claims to firms' future dividends and capital gains....

We document the importance of covenant violations in transmitting bank health to nonfinancial firms using a new supervisory data set of bank loans. More than one-third of loans in our data breach a covenant during the 2008-09 period, providing lenders the opportunity to force a renegotiation of...