We study the effects of PPP loans on business competition. We start by introducing temporary cash subsidies into a model of monopolistic competition with differentiated products and heterogeneous production costs. We test the predictions of our model in a sample of U.S. airport hotels for which...

We examine the relation between CEOs equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distresswhile also...

This paper studies optimal security design in a dynamic setting with an agency problem that arises when an agent in charge of a project can divert cash flows for his own consumption at the expense of an outside investor. Cash flows are unobservable and unverifiable by the outside investor, who...

This paper studies performance-sensitive debt (PSD), the class of debt obligations whose interest payments depend on some measure of the borrowers performance. We demonstrate that the existence of PSD obligations cannot be explained by the trade-off theory of capital structure, as PSD leads to...

We analyze how Dodd-Frank mandated risk retention affects the information investors extract from issuers' retention choices in the CMBS market. We show that the required retention level is both binding and stringent. Although this implies issuers cannot signal using the level of retention, we...

This paper identifies an error in Sundaresan and Wang (2015), hereafter SW, that invalidates its Theorem 1. The paper develops a model of contingent capital (CC) with a stock price trigger that is consistent with SW's framework and yields closed-form solutions for stock and CC prices. Yet the...

Initial proposals for bank contingent convertibles (CoCos) envisioned that these bonds would convert to new equity when the bank's stock price declined to a pre-specified trigger, thereby automatically re-capitalizing the bank and enhancing financial stability. However, subsequent research...