Material-Adverse-Change clauses (MACs) are present in virtually every acquisition agreement. These clauses are the outcome of extensive negotiation and exhibit substantial cross-sectional variation in the number and types of events that are excluded from being ‘material adverse events' (MAEs)....

Using the financial crisis as a natural experiment, we analyze the extent to which firms adjust financial policies on the margin in response to a credit supply shock. We document significant reductions in corporate payouts – both dividends and (to a larger extent) share repurchases - during...