We examine the influence of behavioral characteristics on the design of debt covenants. We find that firms with overconfident CEOs face tighter restrictions on their ability to make future investments, acquisitions, and raise additional debt financing. These restrictions are partially mitigated...

Our study documents the direct and spillover costs arising from the loss of reputation for credit rating agencies (CRAs). Credit ratings are essential for a well-functioning debt market, and the integrity of these ratings depends on the reputation of the CRAs. Using data from the unexpected...

The computation of implied cost of capital (ICC) is constrained by the lack of analyst forecasts for half of all firms. Hou, van Dijk, and Zhang (2012, HVZ) present a cross-sectional model to generate forecasts in order to compute ICC. However, the forecasts from the HVZ model perform worse than...

Stock-based compensation (SBC) reduces the value of shareholder equity, ceteris paribus, and is a significant and growing expense for many firms. Despite its valuation implications and its growing importance, anecdotal evidence suggests that market participants ignore SBC in valuation. We first...

The computation of implied cost of capital (ICC) is constrained by the lack of analyst forecasts for half of all firms. Hou, van Dijk, and Zhang (2012, HVZ) present a cross-sectional model to generate forecasts in order to compute ICC. However, the forecasts from the HVZ model perform worse than...