We examine managerial compensation and wealth sensitivities around CEO changes. The average new CEO is incentivized to increase the risk of the firm primarily because he holds significantly less stock than his predecessor, and in fact riskier policy choices are subsequently implemented. Similar...

Financial theory holds that firms can control agency costs through the use of short-term and secured debt. We examine the relation between the use of secured debt and the incentive of the manager to increase the risk of the firm, as measured by vega. We find that firms utilize secured debt to a...

Forced warrant exercise should elicit a stock price reaction only in response to inventory adjustments or unanticipated increases in agency costs. We find evidence of both effects. Firms calling warrants for redemption experience negative abnormal returns on the announcement date. Negative...

Bankrupt firms should reorganize if the wealth created by continuing is expected to exceed the wealth that would be created by liquidating. We examine 89 firms that reorganized in Chapter 11 and find that, despite having sub-standard accounting profitability, nearly 80% created more wealth by...

We analyze the postbankruptcy cash flows for a sample of firms that emerged from Chapter 11 reorganization between 1983 and 1993. We evaluate the rate of return available to investors who owned all of the debt and equity claims on the firm as it emerged from bankruptcy. On average, this return...

We examine the relation between liquidation costs and proxies for those costs that have been used in prior capital structure studies. Liquidation costs in our sample have a strong negative relation to the fixed-to-total assets ratio, and a strong positive relation to the industry market-to-book...

We examine capital expenditures in multi-segment firms before and after the "perfect storm" that affected pension plans between 2000 and 2002, when bond yields and stock prices both fell precipitously. Our sample of firms went from having overfunded to underfunded pension plans as a result of...