This research examines the implications of contingent claims models for empirical research on default. We focus on the probability of default over a short horizon given the current state of the world, i.e., the conditional probability of default, which more closely resembles the estimates of...

In this study, we trace the impact of corporate focus by estimating the relationships of focus with cash flow and firm value. In contrast to past studies that examine the effects of diversifying across SIC code defined industries, we show, using Tobin's q, that diversification even within a...

In a growing economy the cash flows from investment projects can be expected to be rising over time. In this paper we explore the interactions of growth and uncertainty of cash flows with variable capital intensity in the decision to invest. We derive simple replacements for the usual...

When a mortgage borrower becomes seriously delinquent (i.e., defaults), the lender initiates a time consuming and complex recovery process that may or may not result in foreclosure and eventual disposition of the real estate collateral (REO). This research studies this transition process for a...

We investigate relations among inside ownership, managerial expenses, risk sharing and equity valuations. Our engine of analysis - Real Estate Investment Trusts (REITs) - provides a unique and rich framework for analysis since we can calculate extremely accurate measures of asset replacement...

This study investigates why externally advised Real Estate Investment Trusts (REITs) underperform their internally managed counterparts. Consistent with previous studies, we find that REITs managed by external advisors underperform internally managed ones by over 7% per year. Property-level cash...

We explore the role of expected cash flow volatility as a determinant of dividend policy both theoretically and empirically. Our simple one period model demonstrates that, given the existence of a stock-price penalty associated with dividend cuts, managers rationally pay out lower levels of...

This study documents the wide deviations of securitized real estate assets in equity REITs from the value of the underlying commercial properties. The net asset value of REITs is estimated and used to investigate the sources of premiums/discounts from net asset value in a large sample of equity...

Drawing from a large mortgage loan database and an extensive panel data set on metropolitan areas, this study refines the contingent claims model of default. Recent research has treated default as optimal exercise of a put option and has emphasized loan to value ratios, loan age and interest...

In this study, we explore the role of expected cash flow volatility as a determinant of dividend policy. We first demonstrate that returns are increasing in dividend payout. But, we show that responses to changes in dividends are less sensitive to the magnitude of the change than to the sign of...