Extracting information from daily CDS spreads, we propose a measure of correlated default risk, which we show is a meaningful predictor of bankruptcy clusters. Focusing on U.S. corporate bonds, we also find that our measure of correlated default risk is more pronounced and commands a higher...

Extant research argues that borrowing from financial intermediaries subjects managers to external monitoring. However, given managers' flexibility in choosing the type of debt financing, why would managers submit themselves to external monitoring? Recent theory points to the role of managerial...