The authors examine a firm's choice between public and private debt in a model where the firm's financing source affects its product market behavior. Two effects are examined. When frims' risk-taking decisions are strategic substitutes, debt financing leads to excessively risky product market...

We show that stock market liquidity is an important determinant of the cost of raising external capital. Using a large sample of seasoned equity offerings, we find that, ceteris paribus, investment banks' fees are significantly lower for firms with more liquid stock. We estimate that the...

Using several different methodologies, we quantify the statistical robustness of variables used in prior research to explain initial IPO returns. We establish a parsimonious list of robust variables and evaluate their implications for different theories of IPO underpricing and clustering....

We show that state corruption and political connections have strong effects on municipal bond sales and underwriting. Higher state corruption is associated with greater credit risk and higher bond yields. Corrupt states can eliminate the corruption yield penalty by purchasing credit...

An increase in the cost of selling short should increase the bearish information content of short interest announcements by driving relatively uninformed short sellers out of the market. We extend the Diamond and Verrecchia (1987) model to include short selling against the box and test the...

We use a sample of 86 counties to examine the cross-sectional determinants of sovereign credit ratings. We find that the quality of a country's legal and political institutions plays a vital role in determining these ratings. A one-standard-deviation increase in our legal environment index...

This paper provides a rational explanation for the apparent ability of managers to successfully time the maturity of their debt issues. We show that a structural break in excess bond returns during the early 1980s generates a spurious correlation between the fraction of long-term debt in total...

Previous studies have found that the proportion of equity in total new debt and equity issues is negatively correlated with future equity market returns. Researchers have interpreted this finding as evidence that corporate managers are able to predict the systematic component of their stock...

Using a sample of municipal bond offerings, I find that "local" investment banks have substantial comparative and absolute advantages over nonlocal counterparts---locals charge lower fees and sell bonds at lower yields. Local investment banks' strongest comparative advantage is at underwriting...