We use real estate firms to examine how asset liquidation values influence a firm's financing choices, since the productivity and quality of each asset is observable and potential measures of an asset's liquidation value are easier to ascertain ex-ante. We show that compared to firms that issue...

We study optimal portfolio choice in a two-country model where assets represent claims on future consumption and facilitate trade in markets with imperfect credit. Assuming that foreign assets trade at a cost, agents hold relatively more domestic assets. Consequently, agents have larger claims...

In this paper, we consider the measurement and pricing of distress risk.We present a model of corporate failure in which accounting and market-based measures forecast the likelihood of future financial distress. Our best model is more accurate than leading alternative measures of corporate...