This paper analyzes the ways in which financially distressed firms try to avoid bankruptcy through public and private debt restructurings, asset sales, mergers, and capital expenditure reductions. Their main finding is that a firm's debt structure affects the way financially distressed firms...

This paper presents evidence suggesting that information and incentive problems in the capital market affect investment. The authors come to this conclusion by examining two sets of Japanese firms. The first set has close financial ties to large Japanese banks that serve as their primary source...

We use a simple model to outline the conditions under which corporate investment is sensitive to nonfundamental movements in stock prices. The key prediction is that stock prices have a stronger impact on the investment of "equity-dependent" firms-firms that need external equity to finance...

The majority of asset-management intermediaries (e.g., mutual funds, hedge funds) are structured on an open-end basis, even though it appears that the open-end form can be a serious impediment to arbitrage. I argue that when funds compete to attract investors' dollars, the equilibrium degree of...

This article develops a model that speaks to the goals and methods of financial stability policies. There are three main points. First, from a normative perspective, the model defines the fundamental market failure to be addressed, namely, that unregulated private money creation can lead to an...