We analyze the link between creditor rights and firms' investment policies, proposing that stronger creditor rights in bankruptcy reduce corporate risk-taking. In cross-country analysis, we find that stronger creditor rights induce greater propensity of firms to engage in diversifying...

We propose and model that firms face two potential defaults: Financial default on their debt obligations and operational default such as a failure to deliver on obligations to customers. Hence, firms with limitations on outside financing substitute between saving cash for financial hedging to...

Debt financing gives rise to conflicts of interest between creditors and stockholders that are better controlled with private loans than publicly traded bonds. However, public debt has greater liquidity and diversifiability. We propose an institutional innovation ? a "supertrustee" - that...

Studies of predictive regressions analyze the case where yt is predicted by xt-1 with xt being first-order autoregressive, AR(1). Under some conditions, the OLS- estimated predictive coefficient is known to be biased. We analyze a predictive model where yt is predicted by xt-1, xt-2,... xt-p...

Studies of predictive regressions analyze the case where yt is predicted by xt - 1 with xt being first-order autoregressive, AR(1). Under some conditions, the OLS-estimated predictive coefficient is known to be biased. We analyze a predictive model where yt is predicted by xt - 1,...