Prior studies have generally agreed that bond prices reflect both the event risk faced by the holders of a particular issuer's debt securities and the degree of protection from event risk contained within the terms of the bond. Therefore, it has been found that bonds without event risk...

Employees bear significant costs in bankruptcy. Theoretical models predict they will accept lower wages in the face of financial distress to avoid such costs. Using a natural experiment, I test this theory and find an exogenous increase in default risk causes a decrease in employee wages. The...

A great deal of empirical research finds that stocks with low market-to-book (MTB) ratios have outperformed stocks with high MTB ratios. Rhodes-Kropf, Robinson, and Viswanathan (RKRV) (2005) separate the MTB ratio into a mispricing component and a growth options component. We investigate the...

Investing in M&A targets before they receive offers yields high returns on the announcement day. Ours is the first paper to document targeting ability, which is the ability of fund managers to persistently generate such returns in excess of the returns their benchmarks earn from holding targets....

Using a natural experiment to identify the causal effect of an increase in default risk on firm actions, I find little evidence managers shift risk to corporate pension plans following an exogenous shock to the firm's long-term liabilities. The finding is robust to focusing on firms where the...

This paper studies the link between secondary market liquidity for a corporate bond and the bond's yield spread at issuance. Using ex-ante measures of expected liquidity at the time of issuance, based on the characteristics of the underwriting syndicate, we find an economically large impact of...