This paper tests a new hypothesis that bank managers issue bonds, at least in part, to convey positive, private information and refrain from issuance to hide negative, private information. We find evidence for this hypothesis, using rating migrations, equity returns, bond issuance, and balance...

This paper demonstrates that the risk sensitivity of a banking organization's subordinated debt yield spreads may understate the potential for market discipline in some periods and overstate in others because such spreads contain liquidity premiums that are driven, in part, by the...

We find that the risk-sensitivity of bank holding company subordinated debt spreads at issuance increased with regulatory reforms that were designed to reduce conjectural government guarantees, but declined somewhat with subsequent reforms that were aimed in part at reducing regulatory...

We investigate how banking market competition, informational opacity, and sensitivity to shocks have changed over the last three decades by examining the persistence of firm-level rents. We develop propagation mechanisms with testable implications to isolate the sources of persistence. Our...

We test the widely held assumption that longer restructurings are more costly. In contrast to earlier studies, we use instrumental variables to control for the endogeneity of restructuring time and creditor return. Instrumenting proves critical to our finding that creditor recovery rates...

The $350 billion contraction in the asset-backed commercial paper (ABCP) market in the last five months of 2007 played a central role in transforming concerns about the credit quality of mortgage-related assets into a global financial crisis. This paper attempts to better understand why the...

This paper describes a feedback effect between real and financial development. The paper presents a new variable, which we call the cost of financial intermediation, through which the feedback between finance and growth operates. The theoretical part of the paper describes how specialization of...

We examine the effects of the 2003 dividend tax cut on U.S. stock prices and corporate payout policies. First, using an event-study methodology, we compare the performance of U.S. stocks to that of other securities that should not have benefited from the tax change. We find that U.S. large-cap...

This paper develops and tests a recursive model of debt issuance and rating migration. We examine a signaling game with firms who have private information about their probability distribution of future rating migration. A key assumption of the model is that rating agencies reveal information...

We test the hypothesis that the 2003 dividend tax cut boosted U.S. stock prices and thus lowered the cost of equity. Using an event-study methodology, we attempt to identify an aggregate stock market effect by comparing the behavior of U.S. common stock prices to that of European stocks and real...