We find strong evidence that when the customer base is more concentrated, the supplier firm's CEO receives more risk-taking incentives in compensation. This finding is robust to numerous alternative specifications and to different approaches that mitigate endogeneity concerns. Further, we show...

We reexamine Stiglitz Weiss (1981) credit rationing by simultaneously considering adverse selection and moral hazard. If returns of the projects are ranked by first-order stochastic dominance, neither adverse selection nor moral hazard exists. If the projects have equalized expected returns,...

Cash holdings and bank credit lines are the main sources of corporate liquidity. Similar to the prediction for cash holdings, theory predicts that when facing more intense product market competition, a firm should use more credit lines. The liquidity provided by a credit line allows a firm to...

This paper examines how the information quality of ratings from an issuer-paid rating agency (Standard and Poor's) responds to the entry of an investor-paid rating agency, the Egan-Jones Rating Company (EJR). By comparing S&P's ratings quality before and after EJR initiates coverage of each...

In this paper, we examine how the geographic location of firms affects acquisition decisions and value creation for acquirers in takeover transactions. We find that firms located in an urban area are more likely to receive a takeover bid and complete a takeover transaction as a target compared...

Unlike labor income, human capital is inseparable from individuals and does not accrue to creditors at default. As a consequence, human capital investment should be more resilient to “debt overhang” than labor supply. We develop a dynamic model displaying this important difference. We find...

This paper examines how the information quality of ratings from an issuer-paid rating agency (Standard and Poor's) responds to the entry of an investor-paid rating agency, the Egan-Jones Rating Company (EJR). By comparing S&P's ratings quality before and after EJR initiates coverage of each...