In recent years, a number of papers have established a new empirical regularity. Stocks of distressed firms vastly underperform those of financially healthy firms. It is not necessary to attribute the negative excess returns of distressed firms to inefficient or irrational markets. We show that...

After the completion of a merger and acquisition (M&A), a number of factors may affect the performance, probability of default and actual delisting of the acquirer. In this paper, we present a simple methodology for identifying risk factors and then proceed to identify and investigate...

We investigate the takeover strategies of high default risk acquirers and their value impact. We find that these bidders select bigger, less profitable and unrelated targets, pursue transactions during recessions, and pay with shares by offering target shareholders high premiums. Their long-term...

This paper quantifies for the first time the return on investments in equity crowdfunding. Using an augmented dataset with combined information from Crowdcube, Crunchbase and the Companies House, we study the population of 212 successfully funded initial equity offerings on UK crowdfunding...

We examine the impact of individual stock liquidity on corporate bond yield spreads in the U.S. market. By extending the endogenous-default model to include stock liquidity in the calculation of the bond value we show that a drop in stock liquidity will increase the firm's credit risk by...

This is the first study on the risk-neutral distribution of option returns. We derive solutions for the risk-neutral variance, skewness, and kurtosis of call and put option returns and document several properties of these ex-ante moments. We find that the volatility, skewness, and kurtosis of...

The value premium is the empirical observation that low market/book “value” stocks have higher returns than high market/book “growth” stocks. In this paper, we investigate and present evidence for an “equity as a call option hypothesis” for the value premium. Volatility decreases the...

This paper investigates the determinants of six different lottery-like stock return definitions that have been analyzed separately in prior literature. While we focus on information uncertainty as captured by accounting information, mispricing, institutional ownership and default risk as main...

I propose a neoclassical production economy with costly external financing, partial investment irreversibility, and endogenous investment/financing decisions to rationalize and quantify the well-documented interaction between the book-to-market equity effect and the financial leverage effect in...

Inspired by Aumann and Serrano (2008) and Foster and Hart (2009), we propose risk-neutral options' implied measures of riskiness and investigate their significance in predicting the cross section of expected returns per unit of risk. The empirical analyses indicate a negative and significant...