This article documents that government T-bills provided a higher yield to maturity than an equally risky illiquid asset (bank deposits) in Israel. The difference between the return on the liquid asset relative to the illiquid asset is higher in periods of greater uncertainty. This cannot be...

Net-worth covenants, as introduced by Black and Cox (1976), provide the firm’s bondholders with the right to force reorganization or liquidation if the value of the firm falls below a certain threshold. In the event of default, however, many bankruptcy codes stipulate an automatic stay of...

We examine government decisions on subsidizing investments in the private sector and discriminating among firms in its support programs. By taxing corporate profits, the government may affect corporate investment decisions, causing firms to invest less than what would be socially optimal....