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  • Alexei Tchistyi, David Yermack, +7 authors Jun Yang
  • 2007
We examine the relation between CEOs’ equity incentives and their use of performance-sensitive debt contracts. These contracts require higher or lower interest payments when the borrower's performance deteriorates or improves, thereby increasing expected costs of financial distress while also making a firm riskier to the benefit of option holders. We find(More)
This paper uses the second-generation antitakeover legislation as a natural experiment to understand corporate governance in‡uence on managerial decisions, speci…cally by examining in‡uences on …rms’liquidity choices between cash and loan commitments. These choices di¤er primarily in the allocation of ex-post control rights of …rms’liquidity reserves, which(More)
This paper shows that active risk management policies lead to an increase in firm value. To identify the causal effect of hedging and to overcome endogeneity concerns, we exploit the introduction of weather derivatives as an exogenous shock to firms’ ability to hedge weather risks. This innovation disproportionately benefits weather sensitive firms,(More)
Using a large loan sample from 1990 to 2006, we examine why firms form new banking relationships. Small public firms that do not have existing relationships with large banks are more likely to form new banking relationships. On average, firms obtain higher loan amounts when they form new banking relationships, while small firms also experience an increase(More)
We study dynamic incentive contracts in a continuous-time agency model with productivity switching between two unobserved states, about which an investor may learn by deviating from the myopically optimal action. The optimal contract balances short-run profits from myopic actions and the long-run benefits from obtaining information on the current state. We(More)
This paper evaluates the effect of shareholder passiveness on the market for corporate control. We find that firms with more passive shareholders (lower ownership per non-institutional shareholder) are less likely to be takeover targets, less likely to be acquired and command higher premiums. Using the adoption of anti-takeover law in Delaware as an(More)
In this paper, we examine how the violation of loan covenants (technical default) impacts firm dividend policy. Using contract-level loan data for nonfinancial firms in the U.S., we find that the occurrence of a covenant violation significantly increases the likelihood of a dividend reduction in the subsequent quarter. Moreover, we find that the degree of(More)