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We show that the misalignment of incentives between firms and their creditors has a larger impact on corporate debt policy than most every previously identified empirical determinant (e.g., size, profitability, asset tangibility, market-to-book, etc.). Using a regression discontinuity design, we find that firms completely shut down their net debt issuing(More)
Private equity funds pay particular attention to capital structure when executing leveraged buyouts, creating an interesting setting for examining capital structure theories. Using a large, detailed, international sample of buyouts from 1980-2008, we find that buyout leverage is unrelated to the cross-sectional factors – suggested by traditional capital(More)
We examine the effects of bank–firm relationships on firm performance in Japan. When access to capital markets is limited, close bank–firm ties increase the availability of capital to borrowing firms, but do not lead to higher profitability or growth. The cost of capital of firms with close bank ties is higher than that of their peers. This indicates that(More)
We present novel empirical evidence that conflicts of interest between creditors and their borrowers have a significant impact on firm investment policy. We examine a large sample of private credit agreements between banks and public firms and find that 32% of the agreements contain an explicit restriction on the firm’s capital expenditures. Creditors are(More)
We investigate the relationship between the CEO Pay Slice (CPS) – the fraction of the aggregate compensation of the top-five executive team captured by the CEO – and the value, performance, and behavior of public firms. The CPS may reflect the relative importance of the CEO as well as the extent to which the CEO is able to extracts rents. We find that,(More)
This paper documents the features of compensation peer groups and demonstrates that they play a significant role in understanding variation in CEO compensation. We hand-collect a sample of 83 (373) of the S&P 500 firms that provided explicit lists of compensation peer firms in their proxy statements in fiscal year 2005 (2006). Results show that inclusion of(More)
This paper examines the impact of the conglomerate form on the scale and novelty of corporate Research and Development (R&D) activity. I exploit a quasi-experiment involving failed mergers to generate exogenous variation in acquisition outcomes of target firms. A difference-in-differences estimation reveals that, relative to failed targets, firms acquired(More)
We decompose the cross-sectional variance of firms’ book-to-market ratios using both a long U.S. panel and a shorter international panel. In contrast to typical aggregate time-series results, transitory crosssectional variation in expected 15-year stock returns causes only a relatively small fraction (20-25 percent) of the total cross-sectional variance.(More)