How does capital market access affect the capital structure decisions of firms? To examine this question, we compare the financing decisions of a large sample of private and public companies from 18 different European countries. We find significant differences in the leverage policies of private...

Do the legal rights of creditors influence whether firms borrow from arm's length or relationship lenders in a country? We examine this question by exploiting the staggered adoption of legal reforms that changed creditor rights. We find that as creditor rights strengthen, firms exhibit a greater...

Do the legal rights of creditors influence whether firms borrow from arm's length or relationship lenders in a country? In this paper, we examine this question by exploiting the staggered adoption of legal reforms that changed creditor rights. We show that as creditor rights strengthen, firms...

We examine corporate investment spending around the asset price bubble in Japan in the late 1980s and make three contributions to our understanding of how stock valuations affect investment. First, investment responds significantly to nonfundamental components of stock valuations during asset...

Equity market liberalizations open up domestic stock markets to foreign investors. A puzzle in the literature is why developing countries exhibit relatively small financial impacts associated with liberalizations. We use cross-firm variation in corporate governance at the time of the official...

The inverse relation between leverage and profitability is widely regarded as a serious defect of the tradeoff theory. We show that the defect is not with the theory but with the use of a leverage ratio in which profitability affects both the numerator and the denominator. Profitability directly...

Asymmetric information models suggest that a borrower's choice of debt maturity depends on its private information about its default probabilities, i.e., borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this...

The U.S. defense industry provides a natural experiment for examining how changes in growth opportunities affect the level and structure of corporate debt. Compared with other firms, the growth opportunities of defense firms increased substantially during the Reagan defense buildup of the early...

We study whether bestowing CEO and chairman duties on one individual affects a board's decision to dismiss an ineffective CEO. The results show that the sensitivity of CEO turnover to firm performance is significantly lower when the CEO and chairman responsibilities are vested in the same...