Electricity cannot be economically stored, leading to volatile spot prices and implying that standard cost-of-carry relations are not useful for pricing electricity forward contracts. We model spot and forward power markets, evaluating the demand for risk reduction and assessing equilibrium spot...

We explore the conditional version of the CAPM and the CCAPM using the methodology of Lettau and Ludvigson (2001). As a conditioning variable, we use the Index of Consumer Sentiment from the University of Michigan. The ability of the confidence index to explain the cross-section of the 25...

The impact of debt capacity on recent tests of competing theories of capital structure is examined. Controlling for debt capacity, the pecking order appears to be a good description of the financing policies of a large sample of firms. The main results are first, that internally generated funds...

We analyze several hundred firms that expand via acquisition and/or increase their reported number of business segments. The average combined market reaction to acquisition announcements is positive but, according to the Berger and Ofek (1995) method for valuing conglomerates, the excess values...

We provide evidence that corporate tax status is endogenous to the financing decision, which induces a spurious relation between measures of financial policy and many commonly used tax variables. Specifically, both interest expense and lease payments are tax deductible. Thus, a firm that...

We provide an examination of the use of zero-cost collars and equity swaps by corporate insiders to hedge the risk associated with their personal holdings in the company's equity. These financial instruments have important implications for insider trading and incentive-based contracts. Our...

We examine how shocks to the supply of credit impact corporate financing and investment using the collapse of Drexel Burnham Lambert, Inc., the passage of the Financial Institutions Reform, Recovery, and Enforcement Act, and regulatory changes in the insurance industry as an exogenous...

We examine the evolution of corporate capital structures and find that little of the variation in leverage is captured by previously identified determinants, such as size, market-to-book, profitability, industry, etc. Instead, the majority of variation in leverage ratios is driven by an...

We explore the time-series relationship between investor sentiment and the small-stock premium using consumer confidence as a measure of investor optimism. We estimate the components of consumer confidence related to economic fundamentals and investor sentiment. After controlling for the time...

Critics contend that the use of compensation peer groups has resulted in inflated CEO pay that cannot be justified based on economic fundamentals. We examine this issue using the mandated disclosure of compensation peers that began in 2006. Although firms generally select compensation peers...