In this paper we treat economic and legal advantages to firms in business financing through the issuance of bonds. Besides theoretical analysis paper includes the empirical analysis, a survey conducted in 50 businesses, including individual businesses and corporations, about the types of...

We present the puzzling evidence that, from 1962 to 2009, an average 10.2% of large public nonfinancial US firms have zero debt and almost 22% have less than 5% book leverage ratio. Zero-leverage behavior is a persistent phenomenon. Dividend-paying zero-leverage firms pay substantially higher...

This paper examines whether debt renegotiation mitigates the agency costs of asset substitution. Inspired by the studies of Mella-Barral and Perraudin (1997) and Leland (1998), we have developed an analytical continuous time model of a firm that has the option to switch to a higher risk activity...

This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm's CEO. It also conducts empirical analyses to test the...

This paper studies whether banks charge higher or lower interest rates on loans to firms with overconfident CEOs. It establishes a theoretical model to show the relationship between the loan rate and overconfidence of the borrowing firm's CEO. It also conducts empirical analyses to test the...

An important gap exists in modern finance theory on the impact of labour market frictions on corporate debt policy. Unemployment risk is a considerable issue for workers but despite this, workers' unemployment costs are largely absent from corporate financial theories which typically do not...

In this paper, I examine the strategic role of debt structure in improving the bargaining position of a firm's management relative to its non-financial stakeholders. Debt structure is essential for strategic bargaining because it affects the ease of renegotiating debt contracts and thus the...

I develop a dynamic capital structure model in which shareholders determine a firm's leverage ratio, debt maturity, and default strategy. In my model, the firm's debt matures all at once. Therefore, after repaying the principal shareholders own all the firm's cash flows and can pick a new...

Evidence shows that firms market time their debt maturity. Specifically, maturity is found to be inversely proportional to the term spread (the difference between long and short-term Treasury yield). That is, firms issue short-term debt when the term spread is large and they increase maturity as...

We find that institutional arrangements have an impact on the real economy by affecting firms' choice between private and public debt and the subsequent financing costs. Using new debt issued by firms in 26 non-US countries, we find, after controlling for firm characteristics predicted by debt...