I use the 2007-2008 financial crisis to gauge how internal financial resources and external financial constraints mitigate or worsen the impact of the crisis on default risk of US industrial firms. I identify heterogeneity in short-term funding needs at the onset of the crisis by exploiting...

The paper investigates the relationship between corporate hedging and product market competition. Using a broad sample of multiple commodity-inputs industries over the period of 1994-2008, the paper examines whether an unfavorable commodity shock has a long term effect on unhedged firms. I find...

Co-operative movement dawned in India a century ago to eradicate indebtedness and to accelerate agricultural production in India. Co-operatives are eminently suited to achieve social, economic changes in rural India. However, credit risk is acute in co-operative credit system, predominantly...

This paper analyses the tax shield under realistic assumptions: no immediate refund and potential corporate bankruptcy for different financing policies. Assuming a German setting, we additionally investigate the impact of the interest ceiling (“Zinsschranke”) introduced by the German Tax...

Recent evidence suggests that private firms in the United Kingdom rely heavily on debt financing, have leverage ratios significantly higher than their public counterparts, and their access to external sources of capital remains limited. We extend these findings by examining the implications of...

We present novel empirical evidence on the use of off-balance sheet financing by publicly traded, U.S. non-financial firms. We find that about 5 percent of non-financial firms reported using a special purpose financing vehicle (SPV) to finance receivables in 2006. At the origination of the...

We develop a structural equilibrium model with business cycles and use it to examine the economic implications of voluntary filing for bankruptcy. We find that conflict of interests that arises from the voluntary filing option of Chapter 11 causes higher ex-ante losses in firm value in...

Fama and French (1992) suggest that the positive value premium results from financial distress risk. However, recent empirical research finds that financially distressed firms have lower stock returns, by using empirical estimates of default probabilities. This paper reconciles the positive...

We consider a stochastic volatility model of the mean-reverting type to describe the evolution of a firm's values instead of the classical approach by Merton with geometric Brownian motions. We develop an analytical expression for the default probability. Our simulation results indicate that the...