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Articles on this Page
- 05/16/13--06:21: _Sovereign Debt, Gov...
- 06/05/13--06:29: _Corporate Funding: ...
- 04/15/15--06:00: _State Contract Law ...
- 04/28/15--06:02: _A Century of Capita...
- 05/04/15--06:18: _Fixing Public Secto...
- 09/11/15--06:24: _New FINRA Equity an...
- 02/25/16--06:18: _The Ownership and T...
- 04/19/16--06:25: _Reallocating State ...
- 04/20/16--06:10: _U.S. Taxation of Re...
- 05/16/16--06:02: _Systemic Financial ...
- 05/20/16--06:46: _Creditor Rights, Cl...
- 05/25/16--06:02: _Dual Ownership, Ret...
- 06/14/16--06:19: _Debt Restructurings...
- 07/18/16--06:15: _Does Fiduciary Duty...
- 07/29/16--06:04: _Creditors’ Incentiv...
- 08/14/16--06:00: _Do Creditor Rights ...
- 08/20/16--06:42: _The Impact of the N...
- 08/30/16--06:25: _Buyout Activity: Th...
- 09/07/16--07:01: _Political Lending
- 09/16/16--06:10: _PROMESA and Puerto ...
- 05/16/13--06:21: Sovereign Debt, Government Myopia, and the Financial Sector
- 06/05/13--06:29: Corporate Funding: Who Finances Externally?
- 04/15/15--06:00: State Contract Law and Debt Contracts
- 04/28/15--06:02: A Century of Capital Structure: The Leveraging of Corporate America
- 05/04/15--06:18: Fixing Public Sector Finances: The Accounting and Reporting Lever
- 09/11/15--06:24: New FINRA Equity and Debt Research Rules
- 04/19/16--06:25: Reallocating State Pension Liabilities to Cities and Beyond
- 04/20/16--06:10: U.S. Taxation of Related Party Debt: New Proposed Regulations
- 05/25/16--06:02: Dual Ownership, Returns, and Voting in Mergers
- 06/14/16--06:19: Debt Restructurings and the Trust Indenture Act
- 08/20/16--06:42: The Impact of the New Restructuring Law on Puerto Rico Creditors
- 08/30/16--06:25: Buyout Activity: The Impact of Aggregate Discount Rates
- 09/07/16--07:01: Political Lending
- 09/16/16--06:10: PROMESA and Puerto Rico’s Pathways to Solvency
Why do governments repay external sovereign borrowing? This is a question that has been central to discussions of sovereign debt capacity, yet the answer is still being debated. Models where countries service their external debt for fear of being excluded from capital markets for a sustained period (or some other form of harsh punishment such […]
In our paper, Corporate Funding: Who Finances Externally?, which was recently made publicly available on SSRN, we provide new information on security issues and external financing ratios derived from annual cash flow statements of publicly traded industrial companies over the past quarter-century. Our use of cash flow statements permits us to differentiate between competing forms […]
In our recent JLE paper, State Contract Law and Debt Contracts, we examine the association between state contract law and debt contracts. A recent stream of papers in finance and economics studies the role debt contracts play in mitigating agency problems between equity and debt holders (for example, Baird and Rasmussen, 2006; Chava and Roberts, 2008; Roberts […]
In our paper, A Century of Capital Structure: The Leveraging of Corporate America, forthcoming in the Journal of Financial Economics, we shed light on the evolution and determination of corporate financial policy by analyzing a unique panel data set containing accounting and financial market information for US nonfinancial publicly traded firms over the last century. […]
Detroit’s bankruptcy highlighted the precarious financial situation of many states, cities, and other localities (collectively referred to as municipalities). In an article just published in the UCLA Law Review, we argue that part of the blame for this situation lies with the outdated and ineffective financial reporting regime for public entities and that fixing this […]
The Financial Industry Regulatory Authority (“FINRA”) has adopted amendments to its equity research rules and an entirely new debt research rule. Member firms should review and revise their policies, procedures and processes to reflect the new rules, and analyze what organizational structure and business process changes will be necessary. The main differences between FINRA’s Current […]
The ownership structure of corporate debt is potentially a key factor affecting the cost of financial distress. However, past studies have been hampered by the fact that observing the ownership of debt claims is difficult. In our paper, The Ownership and Trading of Debt Claims in Chapter 11 Restructurings, which was recently featured in the […]
In an effort to increase the visibility of pension commitments, the Governmental Accounting Standards Board (GASB) Statement 68 beginning in 2015: 1) moved pension funding information from the footnotes of financial statements to the balance sheets of employers; and 2) required employers that participate in so-called “cost-sharing” plans to provide information regarding their share of […]
[On April 4, 2016], the U.S. Treasury Department issued a notice of proposed rulemaking that could significantly affect the debt capitalization of U.S. subsidiary groups owned by foreign corporations (and of foreign subsidiaries owned by U.S. corporations). The proposed regulations would, among other things, effectively turn debt issued by a U.S. subsidiary group and held by […]
In our article, Systemic Financial Degradation Due to the Structure of Corporate Taxation, which was recently posted to SSRN, we examine how financial sector safety is undermined by the structure of the corporate tax. Regulators have sought since the 2008 financial crisis to strengthen the financial system. Yet a core source of weakness and an […]
The market for corporate control has become increasingly global over the past decades, with cross-border mergers and acquisitions (M&As) now accounting for more than a third of M&A activity worldwide. To date, empirical studies that have investigated the potential cross-country spillovers in governance and legal standards mainly focused on the economic implications for shareholder wealth, […]
In our paper, Dual Ownership, Returns, and Voting in Mergers, recently published in the Journal of Financial Economics, we study how the joint ownership of target’s equity and debt affects investors’ behavior and outcomes of M&A transactions. Prior research in this area implicitly assumes that each investor holds either stocks or bonds, but not both […]
In a case commonly referred to as Marblegate, a federal district court recently held that a debt restructuring by for-profit education provider EDMC violated a non-impairment provision in the Trust Indenture Act (TIA), a Depression-era statute governing bond indentures. The restructuring presented bondholders with a choice between exchanging their bonds for equity and being left […]
Financial reports should provide useful information to both shareholders and creditors, according to U.S. accounting principles. However, directors of corporations have fiduciary duties toward equity holders only. In our paper, Does Fiduciary Duty to Creditors Reduce Debt-Covenant Avoidance Behavior?, we examine whether this slant in corporate governance biases financial reports in favor of equity investors. In […]
The presence of equity-based incentives in executive pay, by linking the value of compensation to stock return volatility and to stock price, are seen as aligning the interests of managers with those of shareholders (Brockman et al. ; Coles et al. ; Dow and Raposo ; Lo ). Another effect of these incentives is, however, […]
In our article, Do Creditor Rights Increase Employment Risk? Evidence from Loan Covenants, which was recently accepted for publication in the Journal of Finance, we provide evidence that binding financial contracts have a large impact on employees and are an amplification mechanism of economic downturns. A fundamental question in both finance and macroeconomics is whether […]
On June 30, 2016, the United States Senate passed the “Puerto Rico Oversight, Management and Economic Stability Act” (“PROMESA”) and it was quickly signed into law by President Obama. PROMESA enables the Commonwealth of Puerto Rico and its public corporations and other instrumentalities in financial distress to restructure their debt. The goal of PROMESA is […]
Leveraged buyouts are a powerful tool to alter incentives in firms and improve their corporate governance. Despite these benefits, the use of the buyout transaction varies wildly over time. In the U.S., peak buyout years exhibit close to one hundred public-to-private transactions and trough years as few as ten. What explains this dramatic time-variation in […]
In a new paper, Political Lending, we investigate a previously unexplored channel that could be used by firms to enhance the wealth of individual politicians: the amount and terms of the personal debt taken on by politicians and their close family members. Personal debt is economically significant as liabilities are close to 40% of the […]
Facing a self-declared “death spiral” of public debt, the Governor of Puerto Rico announced a debt moratorium earlier this year, halting payments to bondholders. A series of missed payments followed, including a landmark default on constitutionally guaranteed bonds in July. At the same time, Congress passed the Puerto Rico Oversight, Management, and Economic Stability Act […]