In this paper, we study the relationship between default probability and stock returns. Using the market-based measure of Expected Default Frequency— (EDF—) constructed by Moody’s KMV, we first demonstrate that higher default probabilities are not necessarily associated with higher expected stock returns, a finding that complements the existing empirical evidence. We then show that the puzzling...

This study examines how takeover decisions are influenced by the quality of information in target firms’ earnings. We find that bidders are more likely to prefer negotiations in deals involving targets with poor earnings quality. Moreover, in such deals, earnings quality and takeover premiums are negatively related, suggesting that bidders obtain valuable private information through negotiation...

At the time of an initial public offering, shares in a firm are typically held by venture capitalists, insiders, corporate investors, and angel investors. We examine the role of angel investors in the IPO process. We find that angel investors provide equity capital in industries that venture capitalists are less likely to serve and that shareholders in angel backed IPO firms are more likely to ...

The paper analyses dynamic investment behaviour and labour demand of the nancially restricted rm. It shows that rm development is characterised by a negative correlation between leverage and the stocks of capital and labour but a positive correlation between leverage and investment and labour hiring. The paper explains The paper explains why rm growth is decreasing with rm size and age, and why...

Recent empirical studies of dividend taxation have found that: (1) dividend tax cuts cause large, immediate increases in dividend payouts, and (2) the increases are driven by firms with high levels of shareownership among top executives or the board of directors. These findings are inconsistent with existing "old view" and "new view" theories of dividend taxation. We propose a simple alternativ...

The role of the medium of exchange in competition among bidders and its effect on returns to stockholders in corporate takeovers are investigated. Consistent with recent empirical evidence, our model shows that stockholders of both acquiring and target firms obtain higher returns when a takeover is financed with cash rather than equity, and that returns to target shareholders increase with comp...

Using data spanning the 1996-1998 fiscal years of 247 of Japan’s largest manufacturers, we empirically evaluate the extent to which a firm’s investment behavior and financial performance is influenced by its ownership structure. To do so, we examine six distinct categories of Japanese shareholders: foreign investors, investment funds, pension funds, banks and insurance companies, affiliated com...

Managements (“insiders”) of many corporations, especially small or newly-public firms, invest considerable resources in investor relations. We develop a model to explore the incentives of insiders to undertake such costly investments. We point out that insiders may undertake such investments not necessarily to improve the share price, but to enhance the liquidity of their block of shares. This ...

The market for corporate control offers a rich framework to study the interaction between investment and financing decisions. Do corporations have specific preferences means of acquisitions, such using cash or equity pay claims target firm’s shareholders? This builds unique sample 1041 acquisitions over period 2000–2018 in India, major emerging economy with fast-growing capital markets. investi...

From a CAPM-type model the cost of equity is derived for a ...rm operating under various foreign tax systems. The ...rm’s shares are traded in a market which is una¤ected by these systems. The cost of capital depends on the foreign tax system, even for fully equity ...nanced projects. This is neglected in much of the literature. For a corporate income tax the main factor which reduces the cost ...