Prior research shows that technology spillovers across firms increase innovation, productivity, and value. We study how firms finance their own growth stimulated by technology spillovers from their technological peer firms. We find that greater technology spillovers lead to higher leverage. This...

High-yield debt, including leveraged loans, is characterized by incurrence financial covenants, or "cov-lite" provisions. Unlike, traditional, maintenance covenants, incurrence covenants preserve equity control rights but trigger pre-specified restrictions on the borrower's actions once the...

Empirical evidence suggests that capital structure varies across firms facing different levels of information asymmetry, however, this evidence contradict the prediction of pecking order hypothesis. Although debt capacity constraints offer some explanation for this discrepancy, it fails to...

De- and re-levering betas is important to obtain discount rates for assets that are not publicly traded. A de- and re-levering procedure is around for the case of risk-free debt. The procedure for risky debt is much less clear even under very simplifying assumptions. In this paper, I concretize...

A common method of valuing the equity in leveraged transactions is the flows-to-equity method whereby the free cash flow available to equity holders is discounted at the cost of equity. This method uses a standard definition of equity free cash flow, but the cost of equity varies over time as...

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...

This survey introduces a two-volume, 1,900-page reprint collection of articles recently published by Elsevier/North-Holland journals. Volume 1 begins with a comprehensive overview of the empirical evidence, followed by introductions to the econometrics of event studies and various techniques for...

A common method of valuing the equity in highly leveraged transactions is the flows-to-equity method. When applying this method various formulas can be used to calculate the time-varying cost of equity. In this paper we show that some commonly used formulas are inconsistent with the assumptions...

Government bailouts undermine the core principles of capitalism. They are also expensive, unjust, unpopular, and usually represent dramatic deviations from the rule of law. However, they are also, in some cases, necessary. The “problem of bailouts,” then, is that they are almost always...

We argue that the prospect of an imperfect enforcement of debt contracts in default reduces shareholder-debtholder conflicts and induces leveraged firms to invest more and take on less risk as they approach financial distress. To test these predictions, we use a large panel of firms in 41...