Over the past 12 years, financial analysts across the world have been optimistically wrong with their 12-month earnings forecasts by 25.3%. This study may be the first of its kind to assess analyst earnings forecast accuracy at all listed companies across the globe, covering 70 countries. A...

This study identifies the factors affecting the ratings assigned to Canadian firms by the rating agency Standard and Poor's, and proposes a multinomial logit model to predict ratings. We first propose a two-class model which classifies ratings as either investment or speculative grade. We then...

Two models of default risk are prominent in the financial literature: Merton's structural model and Altman's reduced-form model. The former has the benefit of being responsive, since the probabilities of default can continually be updated with the evolution of firms' asset values. Its main flaw...

Market leverage is one of the main determinants for defining the optimal capital structure of the firm, and has a significant impact on several variables that affect the design of the firm's business strategy. This paper is focussed on the potential methodologies exploitable to obtain reliable...

We generalize the asset dynamics assumptions of Leland (1994b) and Leland and Toft (1996) to a much richer class of models. By assuming a stationary corporate debt structure with constant principal, coupon payment and average maturity through continuous retirement and refinancing as long as the...

We study the exposure of the U.S. corporate bond returns to liquidity shocks of stocks and treasury bonds over the period 1973-2007 in a regime switching model. In one regime, liquidity shocks have mostly insignificant effect on bond prices, whereas in another regime, a rise in illiquidity...

We document several facts about corporate debt maturity: (1) debt maturity is pro-cyclical; (2) higher-beta firms tend to have longer debt maturity; (3) shorter maturity amplifies the sensitivity of credit spreads to aggregate shocks. We build a dynamic capital structure model that explains...

In this paper, we revisit a frequently employed simplification within the WACC approach that company cost of capital kV is supposed to be invariant to the debt ratio and therefore equal to the unlevered cost kU . Even though we know from Miles and Ezzell (1980) that kV formally differs from kU ,...

As the economy enters a phase transition into an aperiodic state, the tech industry finds itself at the brink of chaos. Inflated evaluations in private markets before IPOs and increasing Shannon entropy of post-IPO share prices reveal a market teetering on the edge. But is it a phase transition,...

This article develops a continuous-time asset pricing model for valuing corporate securities in the presence of secured and unsecured debt. We consider a framework where creditors dominate the renegotiation process. We show that the unsecured creditors are incentivized to liquidate the firm...