If there is an economically important optimal capital structure, then firms that deviate too far from the optimum will face greater risk of failure or acquisition. Using data from the oil industry we find no significant evidence that capital structure policy affects acquisition or failure...

There is strong empirical evidence supporting capital structure targeting, dividend policy targeting, and the existence of dividend clienteles. If these features are understood to enhance firm value, subject to manager preferences, then this evidence also advances the notion that financial...

Outside of bankruptcy, the right of a secured creditor to “credit bid” allows the secured creditor to compete with cash bids in foreclosure to assure that the secured creditor's collateral is not sold for less than the secured creditor thinks it is worth. In reorganization cases under...

We examine the relation between accounting conservatism and creditor recovery rates for firms in default. We also test the link between conservatism and the length of distress resolution proceedings. We find creditors of firms with more conservative accounting prior to default have significantly...

The design of CEO incentives is particularly important for firms in financial distress. We compare the resolution of CEO incentive problems in distressed firms between the 1980s versus the 1990s, focusing on how changes in contractual provisions, as well as in the executive labor market,...

This paper examines timing of reverse mergers (takeovers) and behaviour of managers of firms that go public in reverse mergers. Results suggest that small private firms go public through mergers with financially distressed firms when market conditions are unfavourable, whereas reverse takeovers...

In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an...

This study examines the effect of board composition on the likelihood of corporate failure in the UK. We consider both independent and non-independent (grey) non-executive directors (NEDs) to enhance our understanding of the impact of NEDs' personal or economic ties with the firm and its...

In a typical "phoenix syndrome" scenario, a small business entrepreneur who controls the financially distressed Company A registers Company B, to which the assets of Company A are transferred in what appears to be fraudulent conveyance. Company B serves as a vehicle through which the business is...

The authors identify several problematic assumptions underlying the benchmark return methodology used by the Center for Research in Security Prices (CRSP), which practitioners and academics would be unlikely to know or mimic. In particular, CRSP includes non-common stock securities that most...