"We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the period 1973 to 2007. A decline in liquidity of stocks or Treasury bonds produces conflicting effects: Prices of investment-grade bonds rise while prices of speculative grade bonds...

We study the exposure of the US corporate bond returns to liquidity shocks of stocks and Treasury bonds over the period 1973 - 2007 in a regime - switching model. In one regime, liquidity shocks have mostly insignificant effects on bond prices, whereas in another regime, a rise in illiquidity...

We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the period 1973-2007 in a regime switching model. In one regime, liquidity shocks have mostly insignificant effect on bond prices, whereas in another regime, a rise in illiquidity...

We investigate how firms manage financial default risk (on debt) and operational default risk (on delivery obligations). Financially constrained firms reduce operational hedging through inventory and supply chain in favor of cash holdings. Our model predicts that firms' markup increases with...

Using data on defaulted firms in the United States over the period 1982 to 1999, we show that creditors of defaulted firms recover significantly lower amounts in present-value terms when the industry of defaulted firms is in distress. We investigate whether this is purely an economic-downturn...