In a takeover contest, the presence of bidders' existing debtholders, if they can be expropriated by issuing new debt with equal or senior priority, allows bidders to commit to bid more than their valuation of the target. Such commitment can be beneficial because it deters potential entry by...

type="main" <title type="main">ABSTRACT</title> <p>Leverage cross-sections more than a few years apart differ markedly, with similarities evaporating as the time between them lengthens. Many firms have high and low leverage at different times, but few keep debt-to-assets ratios consistently above 0.500. Capital structure...</p>

There is an exact linear relation between expected returns and true 'betas' when the market portfolio is on the ex ante mean-variance efficient frontier but empirical research has found little relation between sample mean returns and estimated betas. A possible explanation is that market...