This study develops a flow-based corporate credit model that is able to generate concurrently and endogenously a firm's multi-period probabilities of liquidity crunch and expected liquidity shortfalls. Based upon a state-dependent internal liquidity model, it incorporates both systematic and...

We empirically examine the agency and information asymmetry issues in structural credit models using commercial bank data from 2001 to 2005. We find five independent information asymmetry and agency issue related factors that can explain absolute differences in the default probabilities...

We empirically examine the agency issues in structural credit models using bank data from 2001 to 2005. We find five independent agency related factors explaining the estimating errors of various structural models from 27% to 70%. They include factors of profit efficiency, cost efficiency,...

Of all the structural form credit models, this is one of the first studies to suggest using a firm's future cash flows to estimate its asset value distribution, rather than employing a firm's equity market value. We employ a state-dependent free cash flow process to generate a firm's...

This study examines the effects of information uncertainty and information asymmetry on corporate bond yield spreads using American bond data from year 2001 to 2006. Empirical results show that corporate bond investors charge a significant risk premium on both information uncertainty and...

This study examines the effects of inside debts on a firm's target leverage and explains the low-leverage puzzle (e.g. Graham, 2000) by the over estimation of the target leverage due to neglecting the effects of inside debts. We find that a firm's inside debt affects not only the target...