Valuation of a distressed company is a very tricky issue, for which many approaches and methods have been provided by the literature. Unfortunately, many of the more suitable proposals from a theoretical point of view (i.e., those based on option pricing theory, and even integrated with game...

We develop a model in which time-varying real investment opportunities lead to time-varying adverse selection in the market for initial public offerings. The model is consistent with several stylized facts known about the IPO market: economic expansions are associated with a dramatic increase in...

In a typical leveraged buyout, there are three components. The acquirers borrow a significant portion of a publicly traded firm's value (leverage), take a key role in the management of the firm (control) and often take it off public markets (going private). None of these three components is new...

In a dynamic continuous-time model, we examine the impact of a manager-shareholder conflict over the choice of investment risk on firm value and optimal capital structure. The manager's optimal investment risk policy is substantially different from the policy that maximizes equity or total firm...

We extend our prior work on how both supply (including the emergence of OTC equity derivatives and growth in share lending) and demand (including the growth of hedge funds) factors now facilitate the large-scale, low-cost decoupling of shareholder voting rights from shareholder economic...

Transition matrices are an important determinant for risk management and VaR calculations in credit portfolios. It is well known that rating migration behavior is not constant through time. It shows cyclical behavior and significant changes over the years. We investigate the effect of changes in...

This empirical study suggests that, far from ensuring assets are put to their best use, Chapter 11 encourages small-business entrepreneurs to remain too long with failed businesses before trying to start (or work for) new ones. Small entrepreneurs open and close a number of businesses over the...

This paper develops a model in which an optimal capital structure and an optimal debt maturity are jointly determined in a stochastic interest rate environment. The model yields leverage ratios that are consistent in spirit with empirical observations. The maturity and the credit spread of an...

I examine the effect of investment frictions on leverage dynamics, using a model of the firm whose investments are 1) indivisible and lumpy, and 2) subject to time-to-build, which is a time lag between when investment expenditures are made and when the investment begins to generate cash. The...

When executives ignore the well being of the company's shareholders for the sake of personal profit and upset the precarious balance of the stock markets, putting into question the ethics of the business world and shifting public opinion, legislators must respond quickly and efficiently with new...