Theoretical research predicts many firms should have sizeable exchange rate exposure. However, empirical research has not documented consistently strong relations between exchange rates and stock prices. To examine this discrepancy, we extend prior theoretical results to model a global firm's...

We investigate the impact of legislative reforms in merger control legislation in nineteen industrial countries between 1987 and 2004. We find that strengthening merger control decreases the stock prices of non-financial firms, while increasing those of banks. Cross sectional regressions show...

In this paper, we examine how the cost of resolving bank failures differs between an FDIC liquidation and a private-sector resolution where the assets remain in the banking system. Our findings show that private-sector resolutions do not deliver the expected cost-savings prior to the passage of...

In this paper, we examine whether the structure of the chief executive officer's (CEO) compensation package can explain default risk and performance in bank holding companies (BHCs) during the recent credit crisis. Using a sample of 371 BHCs, we show that in 2006 lower holdings of inside debt...

This paper develops a computational framework to value convertible bonds in general multi-factor Markovian models with credit risk. We show that the convertible bond value function satisfies a variational inequality formulation of the stochastic game between the bondholder and the issuer. We...

This paper proposes an aggregate deposit insurance premium design that is risk-based in the sense that the premium structure ensures the deposit insurance system has a target of survival over the longer term. Such a premium system naturally exceeds the actuarily fair value and leads to a growth...

We provide maximum likelihood estimators of term structures of conditional probabilities of corporate default, incorporating the dynamics of firm-specific and macroeconomic covariates. For U.S. Industrial firms, based on over 390,000 firm-months of data spanning 1980 to 2004, the level and shape...

We develop a theoretical model of decision-making under risk and uncertainty in which bank lenders have both imperfect information about loan applications and imperfect ability to make decisions based on that information. We test the loan-default implications of the model for a large random...

In this paper, I investigate whether banks use loan sales and securitizations (loan transfers) to manage regulatory capital and earnings. My analysis suggests that banks use gains from loan transfers to influence both reported earnings and regulatory capital after controlling for other economic...

This paper develops a novel class of hybrid credit-equity models with state-dependent jumps, local-stochastic volatility and default intensity based on time changes of Markov processes with killing. We model the defaultable stock price process as a time changed Markov diffusion process with...