Using a large sample of bank loans issued to U.S. firms between 1990 and 2004, we find that lower takeover defenses (as proxied by the lower G-index of Gompers, Ishii, and Metrick 2003) significantly increase the cost of loans for a firm. Firms with lowest takeover defense (democracy) pay a 25%...

Financial institutions received billions of dollars from the U.S. Treasury in the form of preferred equity under the Troubled Asset Relief Program (TARP) in 2008. Investments were made during a bad state, but the repayments came in a relatively good time. Comparing TARP's realized returns to...

This paper examines whether the market underreacts to the negative information implicit in the SEO (seasoned equity offerings) announcements. While rational and mispricing theories both predict SEO's, in the aggregate, should earn low returns in the long run, they offer sharply different...

This paper extends the current theoretical models of corporate risk-management in the presence of financial distress costs and tests the model's predictions using a comprehensive dataset. I show that the shareholders optimally engage in ex-post (i.e., after the debt issuance) risk-management...

I analyze the effects of bank characteristics and macroeconomic shocks on interest rate risk-management behavior of commercial banks. My findings are consistent with hedging theories based on cost of financial distress and costly external financing. Banks with higher probability of financial...

The Federal Reserve Bank and the U.S. Treasury bought several individual corporate bonds in response to COVID-19. We show that the program purchased bonds that became highly information-sensitive due to the crisis, bonds used as collateral in the repo market by primary bond dealers, and bonds...

We adapt structural models of default risk to take into account the special nature of bank assets. The usual assumption of log-normally distributed asset values is not appropriate for banks. Typical bank assets are risky debt claims, which implies that they embed a short put option on the...

We adapt structural models of default risk to take into account the special nature of bank assets. The usual assumption of log-normally distributed asset values is not appropriate for banks. Typical bank assets are risky debt claims, which implies that they embed a short put option on the...

We show that banks significantly under-report the risk in their trading book when they have lower equity capital. Specifically, a decrease in a bank's equity capital results in substantially more violations of its self-reported risk levels in the following quarter. The under-reporting is...