We derive a model of bond pricing under ambiguity, showing that ambiguity interacts with risk to determine spreads. Since default is an inherently "unfavorable" outcome, ambiguity-averse bondholders overweigh its probability and demand higher yields for bonds with higher ambiguity.Empirically,...

We examine the impact of ambiguity, or Knightian uncertainty, on the capital structure decision, using a static tradeoff theory model in which agents are both ambiguity and risk averse. The model provides the well-known result that greater risk---the uncertainty over outcomes---leads firms to...

The introduction of deal types for issues of seasoned equity in which the offer follows quickly after the announcement highlights the role of underwriter certification in the performance of SEOs. Controlling for the matching between underwriters and issuing firms, we find that the quality of the...

The introduction of deal types for issues of seasoned equity in which the offer follows quickly after its announcement highlights the role of underwriter certification in the performance of SEOs. Controlling for the matching between underwriters and issuers, underwriter quality is positively...

The introduction of deal types for issues of seasoned equity in which the offer follows quickly after its announcement highlights the role of underwriter certification in the performance of SEOs. Controlling for the matching between underwriters and issuers, underwriter quality is positively...

A Principal-Agent model in which the principal and the agent are ambiguity averse is examined. A novel role for the optimal contract is to induce a speci c partition of the state space for the agent as a means of manipulating the ambiguity he faces, thereby providing more efficient contracting....

A Principal-Agent model is examined in which the principal and the agent are ambiguity averse. With a risk neutral principal and a risk averse agent the presence of ambiguity aversion implies that the principal will not always fully insure the agent when effort is observable. Instead, risk may...