Prior research has argued that convertible preferred equity is the optimal form of venture capital finance, based on datasets with up to 213 observations from the U.S., where unique tax biases exist in favour of convertible preferred. This paper introduces a comparable sample of 3083 Canadian...

We exploit IFRS mandatory adoption as a source of variation in the demand for conditional conservatism to examine the role of unaffiliated bankers on the level of conditional conservatism. We show that firms with unaffiliated bankers on boards of directors experience a significant increase in...

The 2005 Bankruptcy Reform puts derivatives contracts into an effective “super-senior” status. It is intended to provide stability to the derivative markets and reduce systemic risk, however, we find that it has negative impact on derivative-using firms' borrowings. The theoretical model in...

We find that Credit Rating Agencies (CRAs) see through transitory shocks to credit risk that stem from transitory shocks to equity prices, while market-based measures of credit risk do not. For a given stock return, CRAs are significantly less likely to downgrade firms with transitory shocks...

We augment the LLSV creditor rights index with a new “restructuring index” that measures the incentives provided to creditors to grant concessions outside formal bankruptcy. We study the joint impact of the two indexes on a firm's leverage policy. We show that the two indexes have at most a...

This paper studies how the ease of repossessing collateral in bankruptcy affects corporate leasing policy. Using plausibly exogenous variation of the comparative advantages in the ability to repossess assets between leases and secured lending generated by anti-recharacterization laws, I find...

I examine large shareholders' externalities on other claim holders when firms are financially distressed. To this end, I develop a tractable dynamic model of the interplay between these blockholders and regular equity holders. Blockholders' information acquisition and investment decisions play a...

In 2011, German legislators passed the latest reform to German Insolvency Law (ESUG). ESUG mandates that creditors of larger firms can exert more influence on the appointment of the insolvency administrator, resulting in a shift of power from shareholders to creditors. Based on...

We model contagions and cascades of failures among organizations linked through a network of financial interdependencies. We identify how the network propagates discontinuous changes in asset values triggered by failures (e.g., bankruptcies, defaults, and other insolvencies) and use that to...