to represent the compensation for default risk exposure. In this paper we show that this default premium is seriously … insensitive to market-wide changes in default risk. These maturity and quality biases seriously limit the use of the Ibbotson … default premium series in empirical research, because instead of reflecting pure default risk, it also (negatively) reflects …

strategic shareholder actions, traditional risk factors, characteristics, or mispricing, but, instead, is consistent with a risk …-shifting hypothesis. Consistent with the risk-shifting hypothesis, we find that distressed firms tend to overinvest, destroy value, and … cases where CEOs receive above-average equity-based compensation. As default risk rises, credit spreads rise, equity betas …

We study the endogenous determination of corporate debt maturity in a setting with default risk. We assume that firms … projects with positive but small net present value, firms may be forced to default in the first phase. We call this liquidity … risk. The technology is such that earnings can switch to a higher (but riskier) level. In this second phase firms have …

and contains almost all valid information on liquidity risk. As the credit level decreases, the explanatory power of …This paper analyzes the influence of downside risk on defaultable bond returns. By introducing a defaultable bond …-trading model, we show that the decline in market risk tolerance and information accuracy leads to trading loss under downside …

We examine the impact of the unobservable systematic risk factor on default prediction model performance. We find that … including the unobservable systematic risk factor might help improve predictive accuracy, but it might not help improve rank … ordering of firms by default risk. Rank ordering is mainly driven by firm-level variables, while predictive accuracy is …