We investigate the informational content of credit default swap (CDS) spreads for future volatility of (firm) assets and equity. In the cross-section, CDS spreads are significantly more informative about future asset than equity volatility. The informational content of historical and option...

This work documents the existence of a cointegration relationship between credit spreads, leverage and equity volatility for a large set of US companies. It is shown that accounting for the long-run equilibrium dynamic between these variables is essential to correctly explain credit spread...

We study whether firms spread out debt maturity dates, which we call "granularity of corporate debt.'' In our model, firms that are unable to roll over expiring debt need to liquidate assets. If multiple small asset sales are less inefficient than a single large one, it can be optimal to...

This paper studies incentives in a dynamic contracting framework of a levered firm. In particular, the manager selects long-term and short-term efforts, while shareholders choose initially optimal leverage and ex-post optimal default policies. Notably, a resource constraint that binds the...

This paper examines how contingent convertible bonds (CoCos) outstanding impact on expansion investment under exogenous and endogenous conversion threshold. We provide a relatively formal method to price general corporate securities. We find that under an exogenous conversion threshold, there is...

We study a novel aspect of a firm's capital structure, namely the profile of its debt maturity dates. In a simple theoretical framework we show that the dispersion of debt maturities constitutes an important dimension of capital structure choice, driven by firm characteristics and debt rollover...

We study the interaction between financing and investment decisions in a dynamic model where the firm has multiple debt issues and equityholders choose the timing of investment. Jointly optimal capital and priority structures can virtually eliminate investment distortions, because debt priority...

We analyse the effect of mean-reverting cash flows on the costs of shareholder-bondholder conflicts arising from partially debt-financed investments. In a partial equilibrium setting we find that such agency costs are significantly lower under mean-reverting (MR) dynamics, when compared to the...

We examine the interaction between investment and financing policies in a dynamic model for a firm with existing assets-in-place and a growth option, of which investment cost is financed with equity and contingent convertible bond (CoCo). We attempt to clarify how CoCo impacts on investment...

We study a defaultable firm's debt priority structure in a simple structural model where the firm issues senior and junior bonds and is subject to both liquidity and solvency risks. Assuming that the absolute priority rule prevails and that liquidation is immediate upon default, we determine the...