Seasoned equity offerings (SEOs) are sales of stock after the initial public offering. They are a means to raise funds through the sale of stock rather than the issuance of additional debt. We propose a method to predict the characteristics of firms that undertake this form of financing. Our procedure is based on logistic regression where firm-specific variables are obtained from the perspectiv...

n Robert M. Hull is an Associate Professor of Finance at Washburn University. In this paper, I extend the stock-for-debt research by investigating whether stock value is influenced by how a firm changes its leverage ratio in relationship to its industry leverage ratio norm. I find that announcement-period stock returns for firms moving “away from” industry debt-to-equity norms are significantly...

This paper studies the behavior of leverage ratios in a dynamic trade-off model with real frictions. Firms underutilize debt when financing investment to retain financial flexibility. Underutilization of debt persists even when firms exercise their last investment options, and it is more (less) severe for more back-loaded (front-loaded) investment opportunities. Thus, leverage dynamics cruciall...

The contribution of this paper is in emphasizing endogenous credit rationing in the analysis of effects of bankruptcy rules on entrepeneurs’ decisions with respect to risktaking and ex ante skill-development. Unlike most of the literature, both the debt claim and the amount of debt financing is endogenous in our exercise. This allows us to determine the extent of credit rationing that banks use...

This paper offers a new mathematical formulation that addresses the relationship between expected price-to-book ratio, dividend per share, dividend payout ratio, systematic and unsystematic risks. The sample includes the non-financial firms in the DJIA covering the period 1997-2006. The general results show that the expected price-to-book ratios are: (a) positively associated with the expected ...

Emerging findings imply that distinct neurobehavioral systems process gains and losses. This study investigated whether individual differences in gain learning and loss learning might contribute to different life financial outcomes (i.e., assets versus debt). In a community sample of healthy adults (n = 75), rapid learners had smaller debt-to-asset ratios overall. More specific analyses, howeve...

We thank an anonymous referee, an Associate Editor, Gurdip Bakshi, and Jay Huang for their valuable comments and suggestions. We also thank Henry Cao, Hua He, Hayne Leland, Mark Rubinstein, and Matt Spiegel for their advice on an earlier version where a static model was developed. Abstract This paper develops a model in which an optimal capital structure and an optimal debt maturity are jointly...

The “debt-overhang hypothesis” – that households cut back more on their spending in a crisis when they have higher levels of outstanding mortgage debt (Dynan, 2012) seems to be taken for granted by macroprudential authorities several countries policy decisions, as well the international organizations evaluate and comment countries’ policy. Results are presented UK microdata reject debt-overhang...

We explore the role of inflation credibility in self-fulfilling debt crises. In particular, we propose a continuous time model of nominal debt with the potential for selffulfilling debt crises as in Calvo (1988) and Cole and Kehoe (2000). We characterize crisis equilibria conditional on the level of commitment to low inflation. With strong commitment, which can be interpreted as joining a monet...

Moody's ratings for tax-backed municipal bonds are derived from five primary credit factors: legal security, local economy , financial operations, debt profile and management. This special comment will focus on the debt component of Moody's analysis and ratings. Debt as a credit factor can not be isolated from the other credit factors, nor viewed as a stand-alone ratio or set of ratios. Rather,...