In a recent paper, George and Hwang (2009) assert that endogenous debt choice in a cross-section of diverse firms can imply a negative relation between leverage or distress risk and expected stock returns. This note clarifies conditions, in the context of their model, under which this is so. We...

We study the effect of asset tangibility on corporate financing and investment decisions. Financially constrained firms benefit the most from investing in tangible assets because those assets help relax constraints, allowing for further investment. Using a dynamic model, we characterize this...

We characterize the relation between asset structure and capital structure by exploiting variation in the salability of corporate assets. Theory suggests that asset tangibility increases borrowing capacity because it allows creditors to more easily repossess a firm's assets. Tangible assets,...