Exploiting the staggered adoption of anti-recharacterization laws across various U.S. states as quasi-exogenous shocks to secured lenders' ability to repossess assets in bankruptcy, we find that the strengthening of creditor rights is associated with a significant decrease in the cost of equity...

This paper tests the influence of managerial entrenchment and capital structure decisions using Nepalese firms' data and executives view. A majority of earlier studies show that firm leverage is negatively associated with the degree of entrenchment of managers. This study examines whether or not...

Do leveraged buyout transactions increase the chance of bankruptcy? While corporate finance theory predicts that such sharp changes in capital structure increase financial distress costs by raising the probability of bankruptcy for each company, previous studies seem to fail to find any...

Within the same debt contract, some financial covenants are considerably more restrictive than others. I exploit this heterogeneity in covenant design and show that the design of the most restrictive covenant is systematically associated with covenant outcomes - compliance, violations, or...

Corporate debt maturity is a concave function of financial leverage when the debt has restrictive asset-based covenants attached. This concavity kicks in earlier with increasing covenant tightness and is absent when firms have no restrictive asset-based covenants. We argue that this concavity is...

I develop a dynamic capital structure model in which shareholders determine a firm's leverage ratio, debt maturity, and default strategy. In my model, the firm's debt matures all at once. Therefore, after repaying the principal shareholders own all the firm's cash flows and can pick a new...

Sell-side analysts play an important role in propagating corporate capital structure choices across firms. Using exogenous characteristics of analyst network peers as well as the “friends-of-friends” approach from the network effects literature to identify peer effects, we find that...

This paper investigates the relationship between leverage and returns in private equity buyout transactions. In contrast to the predictions of traditional capital structure theory, we find that transactions financed with large amounts of debt are associated higher transaction prices and lower...

This paper considers the optimal joint decision on firm organization and capital structure under a tax-bankruptcy trade-off, stressing the role of guarantees against default. Conditional guarantees, which are embedded in parent-subsidiary structures, increase joint value and joint debt relative...