We show how target debt ratios in book value terms applied to new investment can improve alignment of investment incentives in firms with risky debt outstanding and asymmetric information. While wealth transfer from both agency conflicts can reduce the value of existing equity, new debt offsets...

We study the value of senior and junior bonds with random default and absolute priority rule violation and propose a simple approach to value risky bonds with varying parameters for the violation. Recognizing the sources of violation from equity contribution and value loss from challenges by...

We study corporate spinoffs with changes in CEO compensation to examine how spinoffs affect managerial incentive compensation and whether the changes in managerial compensation can explain the value enhancement and operating performance improvements that occur following spinoffs. Analyzing a...

This paper develops an approach to tighten the bounds on asset pricing in an incomplete market that combines no-arbitrage pricing and preference-based pricing, and the approach is applied to call options without dynamic rebalancing. With the no-arbitrage pricing, it is straightforward to obtain...

I study changes in CEO compensation and pay-performance relations to examine how corporate spinoffs affect managerial incentive compensation and whether the changes in management compensation can explain the value enhancement and operating performance improvements that occur following spinoffs....

Purpose – This study aims to focus on the profitability of momentum trading in the Korean stock market. More specifically, it aims to conduct an examination of the relationship between momentum returns and idiosyncratic volatility (IVol) to determine whether momentum profits can be explained...