This study examines how the institutional environment influences capital structure and debt maturity choices of firms in 39 developed and developing countries. We find that a country’s legal and tax system, corruption, and the preferences of capital suppliers explain a significant portion of...

In an efficient market, spreads will reflect both the issuer’s current risk and investors’ expectations about how that risk might change over time. Collin-Dufresne and Goldstein (<xref>2001</xref>) show analytically that a firm’s expected future leverage importantly influences the spread on its bonds....

Well-performing default predictions show good discrimination and calibration. Discrimination is the ability to separate defaulters from nondefaulters. Calibration is the ability to make unbiased forecasts. I derive novel discrimination and calibration statistics to verify forecasts expressed in...

This paper examines the relation between corporate lobbying and fraud detection. Using data on corporate lobbying expenses between 1998 and 2004, and a sample of large frauds detected during the same period, we find that firms’ lobbying activities make a significant difference in fraud...

Using a comprehensive sample of U.S. mutual funds from 1992 to 2004, we find strong evidence that investment bank-affiliated funds underperform unaffiliated funds. Consistent with the conflict of interest hypothesis, we find that affiliated funds hold disproportionately large amounts of stocks...

I study the relation between corporate diversification and labor productivity in a sample of over 500,000 firms from 46 countries. Across the entire sample, greater diversification is associated with significantly lower labor productivity. The negative relation between diversification and labor...

Using a new variable based on a model of dividend smoothing, we find that dividend growth is highly predictable and that cash flow news contributes importantly to return variability. Cash flow betas derived from this predictability are central to explaining the size effect in the cross section...

This paper examines whether a firm’s reputation is a determinant of repurchase completion rates (the ratio of actual to announced repurchases) and whether the stock market discounts announcements made by less reputable firms. Prior completion rates are positively correlated with current...

We study decisions to sell nonexcludable private information in the presence of a trading opportunity. Sell-side agents heighten competition among agents who buy their signals to combine with their own for proprietary trading purposes and thereby promote financial market efficiency. This result...

Practitioners increasingly use the enterprise multiple (EM) as a valuation measure. EM is (equity value + debt + preferred stock – cash) / (EBITDA). We document that EM is a strong determinant of stock returns. Following Fama and French (1993) and Chen, Novy-Marx, and Zhang (2010), we create...