In many countries, bankruptcy is associated with low recovery by creditors. We develop a model of corporate credit markets in such an environment. Corporate credit is provided by either a bond market or risk-averse banks. Restructuring of insolvent firms happens out of court if in-court...

Fixed income markets rely on delegated asset management, where fund managers' portfolio decisions are directed and restricted by investment mandates. We use textual analysis to classify U.S. fixed income funds' mandate contents. Credit ratings can be used in mandates to define investable assets....

How do changes in a rating agency's reputation affect the ratings market? We study the dynamics of credit ratings after Standard & Poor's (S&P) was shut out of a large segment of the commercialmortgage-backed securities (CMBS) ratings market following a procedural mistake. Exploiting the fact...

Large-scale asset programmes aim to impact the real economy through the financial system. The ECB has focused much of its policies on safe assets. An intended channel of transmission of this type of programme is the “portfolio rebalancing channel”, whereby investors are influenced to shift...

We use an important legal event as a natural experiment to examine equity-debt conflicts in the vicinity of financial distress. A 1991 Delaware bankruptcy ruling changed the nature of corporate directors' fiduciary duties in that state. This change limited incentives to take actions favoring...

We analyze a reform of insurance companies' capital requirements for mortgage-backed securities. First, credit ratings were replaced as inputs to capital regulation. Second, the redesigned system ensures capital buffers sufficient to withstand expected losses, but insufficient to protect against...

We analyze a reform of insurance companies' capital requirements for mortgage-backed securities. First, credit ratings were replaced as inputs to capital regulation. Second, the redesigned system ensures capital buffers sufficient to withstand expected losses, but insufficient to protect against...