Abstract Managers are required to disclose material climate risk in Form 10-K, but their decision whether or not is confounded by the lack of consensus on firms, as well uncertainty about enforcement disclosure regulations. Using SASB Materiality Map™ proxy for market expectations materiality, we test association between disclosing 10-Ks and firm (proxied cost equity (COE)) varies with material...

We show that firm-level short interest predicts negative returns for individual stocks during economic expansions, while aggregate short interest predicts negative market returns during recessions. Viewing short sellers as informed traders, these findings are consistent with Kacperczyk, Van Nieuwerburgh, and Veldkamp’s (2016) model in which rational yet cognitively constrained traders optimally...

In this paper we provide evidence on how firm-specific and macroeconomic uncertainty affects shareholders’ valuation of a firm’s cash holdings. This extends previous work on this issue by highlighting the importance of the source of uncertainty. Our findings indicate that increases in firm-specific risk generally increase the value of cash while increases in macroeconomic risk generally decreas...

This paper characterizes optimal pay-performance sensitivities of compensation contracts for managers who have private information about their skills, and those skills affect their outside employment opportunities. The model presumes that the rate at which a manager’s opportunity wage increases in his expertise depends on the nature of that expertise, i.e., whether it is general or firm-specifi...

This study examines the relationship between product differentiation and financial leverage. It argues that product differentiation is associated with investments in firm-specific assets that have lower liquidation value than general assets. Debt investors need to charge a higher interest rate to cover the risk of default, making the firm resort to equity financing and resulting in low financia...

This paper is an empirical investigation of the asset pricing implication of rollover risk, the risk that a firm might not be able to refinance its due liabilities. I focus on the long-term debt rollover risk and use the proportion of long-term debt falling due within the year to measure a firm’s exposure to rollover risk. I find that firm-specific rollover risk coupled with deteriorating marke...

We consider a continuous time principal-agent model where the agent (the manager) can choose the output’s exposure to risk and the output’s expected return of the principal (the firm). Both the firm and the manager have exponential utility and can trade in a frictionless market. When the firm observes the manager’s choice of effort and volatility, there is an optimal contract that induces the m...

We study the pricing of collateralized debt obligations (CDOs) using an extensive new data set for the actively-traded CDX credit index and its tranches. We find that a three-factor portfolio credit model allowing for rm-speci c, industry, and economywide default events explains virtually all of the time-series and crosssectional variation in CDX index tranche prices. These tranches are priced ...