A common method of valuing the equity in leveraged transactions is the flows-toequity method whereby the free cash flow available to equity holders is discounted at the cost of equity. This method uses a standard definition of equity free cash flow, but the cost of equity varies over time as leverage varies. Various formulas can be used to calculate the time-varying cost of equity, most of whic...

In credit modeling, default intensity is known to depend on rating history-specific factors, notably credit rating, but variation in aggregate default rates over time presumably also reflects changes in general economic conditions. We fit Cox intensity models for defaults, as well as for major upgrades and downgrades in credit rating, with both rating history-specific factors and a broad range ...

This study explores the relation between credit risks of financial and non-financial firms and their corporate governance structures from the perspective of creditors. US based CDS spreads are used to measure firms’ risk taking behavior. Governance attributes have differential effects across firm types: Board independence and financial transparency have a greater impact on the default risk of f...

The two main stylized facts in the mutual fund literature are that funds exhibit little ability to persistently outperform their peers, but that new money flows into funds with the highest past returns. The traditional interpretation is that fund managers are unskilled and fund investors are unsophisticated. Berk and Green (2004) offer an alternative, arguing that more-skilled managers will man...

This paper builds a venture capital index from 1987 to 1999 that consists of 12,946 rounds of venture financing with 5,643 venture-backed firms. The paper uses two innovative techniques, a re-weighting procedure and a method of moment repeat sales regression, to mitigates three problems missing data, censored data, and sample selection. We report the time series of capital flows, net asset valu...

We compare underwriting performance by commercial bank-affiliated firms (Section 20’s) and traditional investment banks over the period 1995-98. We find that gross spreads are lower in the case of Section 20 underwritings, but that yield spreads are not. Our sample includes a substantial number of observations following changes in Federal Reserve policies that substantially eased restrictions o...

Regulators’ interest in analyst recommendations stems from the belief that small investors are unaware of the conflicts sell-side analysts face and may, as a consequence, be misled into making suboptimal investment decisions. We examine who trades on security analyst stock recommendations by extending prior research to focus on investor-specific responses to revisions. We find that both large a...

We highlight the implications of combining underwriting services and lending for the choice of underwriters and for competition in the underwriting business. We show that cross-selling can increase underwriters’ incentives, and we explain three phenomena: first, that cross-selling is important for universal banks to enter the investment banking business; second, that cross-selling is particular...