In this paper I analyze how debt structure and the strategic interaction betweenshareholders and creditors in the event of default a¤ect expected stock returns. By en-dogenizing shareholders decision to default, the model generates new predictions linking…rm characteristics to expected stock...

The trade-off theory on capital structure is tested by modelling the capital structure target as the solution to a maximization problem. This solution maps asset volatility and loss given default to optimal leverage. By applying nonlinear structural equation modelling, these unobservable...

This paper presents a dynamic multi-equation model based on a balance sheet identity, where technical aspects of capital structure are highlighted through separately observing debt and equity and their relationship to investment. Additionally, leverage dynamics are interpreted in their role for...

On 3 December EY hosted a SUERF conference on banking reform with Sir Howard Davies, the Chairman of RBS, and Dame Colette Bowe, the Chairman of the Banking Standards Board, as the two keynote speakers. Professor David Miles (Imperial College) gave the SUERF 2015 Annual Lecture on Capital and...

We build a dynamic capital structure model to study the link between systematic risk exposure and debt maturity, as well as their joint impact on the term structure of credit spreads. Our model allows for time variation and lumpiness in the maturity structure. Relative to short-term debt,...

This study provides new stylized facts on the determinants of corporate failure and acquisition in Germany. It also offers important lessons for the design of empirical studies. We show that firms experiencing failure or acquisition are significantly different from surviving firms on a number of...

A firm's current leverage ratio is one of the core characteristics of credit quality used in statistical default prediction models. Based on the capital structure literature, which shows that leverage is mean-reverting to a target leverage, we forecast future leverage ratios and include them in...

When partially inalienable managerial entrenchment is introduced to Zwiebel's 1996 model of dynamic capital structure, anticipated debt renegotiation between a higher-type manager and the creditor reduces expected firm value. Only lower-type managers can issue debt to avoid shareholder takeover

We test the determinants of leverage within the trade-off and pecking order framework, and the speed of adjustment to the target leverage of large and small firms quoted on a regulated (Main) and relatively unregulated market (AIM) in the UK. We find that both firm size and market of quotation...

I propose a neoclassical production economy with costly external financing, partial investment irreversibility, and endogenous investment/financing decisions to rationalize and quantify the well-documented interaction between the book-to-market equity effect and the financial leverage effect in...