-
作者：Chen, Hui
作者单位：Massachusetts Institute of Technology (MIT)
摘要：I build a dynamic capital structure model that demonstrates how business cycle variation in expected growth rates, economic uncertainty, and risk premia influences firms' financing policies. Countercyclical fluctuations in risk prices, default probabilities, and default losses arise endogenously through firms' responses to macroeconomic conditions. These comovements generate large credit risk premia for investment grade firms, which helps address the credit spread puzzle and the under-leverage...
-
作者：van Binsbergen, Jules H.; Graham, John R.; Yang, Jie
作者单位：Northwestern University; Stanford University; National Bureau of Economic Research; Duke University; Georgetown University
摘要：We use exogenous variation in tax benefit functions to estimate firm-specific cost of debt functions that are conditional on company characteristics such as collateral, size, and book-to-market. By integrating the area between the benefit and cost functions, we estimate that the equilibrium net benefit of debt is 3.5% of asset value, resulting from an estimated gross benefit (cost) of debt equal to 10.4% (6.9%) of asset value. We find that the cost of being overlevered is asymmetrically higher...
-
作者：Wang, Tracy Yue; Winton, Andrew; Yu, Xiaoyun
作者单位：University of Minnesota System; University of Minnesota Twin Cities; Indiana University System; IU Kelley School of Business; Indiana University Bloomington; Shanghai Jiao Tong University
摘要：We examine how a firm's incentive to commit fraud when going public varies with investor beliefs about industry business conditions. Fraud propensity increases with the level of investor beliefs about industry prospects but decreases when beliefs are extremely high. We find that two mechanisms are at work: monitoring by investors and short-term executive compensation, both of which vary with investor beliefs about industry prospects. We also find that monitoring incentives of investors and und...
-
作者：Carlson, Murray; Lazrak, Ali
作者单位：University of British Columbia; Hautes Etudes Commerciales (HEC) Paris
摘要：We model the debt and asset risk choice of a manager with performance-insensitive pay (cash) and performance-sensitive pay (stock) to theoretically link compensation structure, leverage, and credit spreads. The model predicts that optimal leverage trades off the tax benefit of debt against the utility cost of ex-post asset substitution and that credit spreads are increasing in the ratio of cash-to-stock. Using a large cross-section of U.S.-based corporate credit default swaps (CDS) covering 20...
-
作者：Korteweg, Arthur
作者单位：Stanford University
摘要：I estimate the market's valuation of the net benefits to leverage using panel data from 1994 to 2004, identified from market values and betas of a company's debt and equity. The median firm captures net benefits of up to 5.5% of firm value. Small and profitable firms have high optimal leverage ratios, as predicted by theory, but in contrast to existing empirical evidence. Companies are on average slightly underlevered relative to the optimal leverage ratio at refinancing. This result is mainly...
-
作者：Dyck, Alexander; Morse, Adair; Zingales, Luigi
作者单位：University of Toronto; National Bureau of Economic Research; University of Chicago
摘要：To identify the most effective mechanisms for detecting corporate fraud, we study all reported fraud cases in large U.S. companies between 1996 and 2004. We find that fraud detection does not rely on standard corporate governance actors (investors, SEC, and auditors), but rather takes a village, including several nontraditional players (employees, media, and industry regulators). Differences in access to information, as well as monetary and reputational incentives, help to explain this pattern...
-
作者：Casamatta, Catherine; Guembel, Alexander
作者单位：Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; Universite de Toulouse; Universite Toulouse 1 Capitole
摘要：This paper argues that the legacy potential of a firm's strategy is an important determinant of CEO compensation, turnover, and strategy change. A legacy makes CEO replacement expensive, because firm performance can only partially be attributed to a newly employed manager. Boards may therefore optimally allow an incumbent to be entrenched. Moreover, when a firm changes strategy it is optimal to change the CEO, because the incumbent has a vested interest in seeing the new strategy fail. Even th...
-
作者：Taylor, Lucian A.
作者单位：University of Pennsylvania
摘要：I evaluate the forced CEO turnover rate and quantify effects on shareholder value by estimating a dynamic model. The model features learning about CEO ability and costly turnover. To fit the observed forced turnover rate, the model needs the average board of directors to behave as if replacing the CEO costs shareholders at least $200 million. This cost mainly reflects CEO entrenchment rather than a real cost to shareholders. The model predicts that shareholder value would rise 3% if we elimina...
-
作者：Bebchuk, Lucian A.; Grinstein, Yaniv; Peyer, Urs
作者单位：Harvard University; National Bureau of Economic Research; Cornell University
摘要：We study the relation between opportunistic timing of option grants and corporate governance failures, focusing on lucky grants awarded at the lowest price of the grant month. Option grant practices were designed to provide lucky grants not only to executives but also to independent directors. Lucky grants to both CEOs and directors were the product of deliberate choices, not of firms' routines, and were timed to make them more profitable. Lucky grants are associated with higher CEO compensati...
-
作者：Rampini, Adriano A.; Viswanathan, S.
作者单位：Duke University
摘要：Collateral constraints imply that financing and risk management are fundamentally linked. The opportunity cost of engaging in risk management and conserving debt capacity to hedge future financing needs is forgone current investment, and is higher for more productive and less well-capitalized firms. More constrained firms engage in less risk management and may exhaust their debt capacity and abstain from risk management, consistent with empirical evidence and in contrast to received theory. Wh...
