Gregor Matvos (Booth School of Business, University of Chicago) presenting 'Debt and Creative Destruction: Why is Subsidizing Corporate Debt Optimal?', a theory that rationalizes the government subsidy to corporate debt financing. Two firms compete for survival in a declining industry in a two dimensional war of attrition, in which one dimension, financing, is endogenous. The conflict of interest between equity-and debt-holders is socially desirable by expediting firm exit. Individual firms...

Pierre Mella-Barral (Edhec) discussing Roman Inderst (Goethe University Frankfurt) on 'Preserving 'Debt Capacity' or 'Equity Capacity': A Dynamic Theory of Security Design under Asymmetric Information'

Pierre Mella-Barral (Edhec) discussing Roman Inderst (Goethe University Frankfurt) on 'Preserving 'Debt Capacity' or 'Equity Capacity': A Dynamic Theory of Security Design under Asymmetric Information'

Roman Inderst (Goethe University Frankfurt) presenting 'Preserving 'Debt Capacity' or 'Equity Capacity': A Dynamic Theory of Security Design under Asymmetric Information', a paper that shows in a dynamic model of optimal security design when firms should preserve equity capacity through high leverage or debt capacity through initial low leverage. Thereby, firms reduce a problem of either underinvestment or overinvestment when they must raise financing under asymmetric information, probably...

Roman Inderst (Goethe University Frankfurt) presenting 'Preserving 'Debt Capacity' or 'Equity Capacity': A Dynamic Theory of Security Design under Asymmetric Information', a paper that shows in a dynamic model of optimal security design when firms should preserve equity capacity through high leverage or debt capacity through initial low leverage. Thereby, firms reduce a problem of either underinvestment or overinvestment when they must raise financing under asymmetric information, probably...

Todd Gormley (Wharton School, University of Pennsylvania) discussing Dragana Cvijanovic (HEC Paris) on 'Real Estate Prices and Firm Capital Structure'

Todd Gormley (Wharton School, University of Pennsylvania) discussing Dragana Cvijanovic (HEC Paris) on 'Real Estate Prices and Firm Capital Structure'

Dragana Cvijanovic (HEC Paris) presenting 'Real Estate Prices and Firm Capital Structure', a paper that examines the impact of real estate prices on firm capital structure decisions. The author finds that for a typical US listed company, a one standard deviation increase in collateral value translates into a 2.1 percent increase in total leverage. The identification strategy employs a triple interaction of MSA level land supply elasticity, aggregate real estate price changes and a measure of...

Dragana Cvijanovic (HEC Paris) presenting 'Real Estate Prices and Firm Capital Structure', a paper that examines the impact of real estate prices on firm capital structure decisions. The author finds that for a typical US listed company, a one standard deviation increase in collateral value translates into a 2.1 percent increase in total leverage. The identification strategy employs a triple interaction of MSA level land supply elasticity, aggregate real estate price changes and a measure of...

Daniel Ferreira (London School of Economics) discussing Alex Edmans (Wharton School, University of Pennsylvania) on 'The Effect of Liquidity on Governance '

Daniel Ferreira (London School of Economics) discussing Alex Edmans (Wharton School, University of Pennsylvania) on 'The Effect of Liquidity on Governance '

Krishnamurthy Subramanian (Indian School of Business) discussing research by Darius Miller (Southern Methodist University) on a continuing controversy in whether U.S. securities laws.

Alex Edmans (Wharton School, University of Pennsylvania) presenting 'The Effect of Liquidity on Governance ', a paper that studies the effect of stock liquidity on blockholders’ choice of governance mechanisms. The authors focus on hedge funds as they are unconstrained by legal restrictions and business ties, and thus have all governance channels at their disposal. Since the threat of governance, not just actual governance, can discipline managers, ehe authors use Section 13 filings to...

Krishnamurthy Subramanian (Indian School of Business) discussing research by Darius Miller (Southern Methodist University) on a continuing controversy in whether U.S. securities laws.

Alex Edmans (Wharton School, University of Pennsylvania) presenting 'The Effect of Liquidity on Governance ', a paper that studies the effect of stock liquidity on blockholders’ choice of governance mechanisms. The authors focus on hedge funds as they are unconstrained by legal restrictions and business ties, and thus have all governance channels at their disposal. Since the threat of governance, not just actual governance, can discipline managers, ehe authors use Section 13 filings to...

Darius Miller (Southern Methodist University) presenting research on a continuing controversy in whether U.S. securities laws: are they really enforced against foreign firms, considering that public enforcement actions by the SEC are infrequent and often result in insignificant penalties? The auhors examine private enforcement actions of U.S. securities laws and find that 269 securities class-action lawsuits were filed against foreign firms from 1996 to 2008. They document the severity of the...

Darius Miller (Southern Methodist University) presenting research on a continuing controversy in whether U.S. securities laws: are they really enforced against foreign firms, considering that public enforcement actions by the SEC are infrequent and often result in insignificant penalties? The auhors examine private enforcement actions of U.S. securities laws and find that 269 securities class-action lawsuits were filed against foreign firms from 1996 to 2008. They document the severity of the...

Alessandro Riboni (Université Paris-Dauphine) on Fausto Pannunzi (Bocconi University) presenting 'Legal Investor Protection and Takeovers'

Alessandro Riboni (Université Paris-Dauphine) on Fausto Pannunzi (Bocconi University) presenting 'Legal Investor Protection and Takeovers'

Fausto Pannunzi (Bocconi University) presenting 'Legal Investor Protection and Takeovers', a paper that studies the role of legal investor protection for the efficiency of the market for corporate control. Stronger legal investor protection limits the ease with which an acquirer, once in control, can extract private benefits at the expense of non-controlling investors. This increases the acquirer’s capacity to raise outside funds to finance the takeover. Absent effective competition for the...

Fausto Pannunzi (Bocconi University) presenting 'Legal Investor Protection and Takeovers', a paper that studies the role of legal investor protection for the efficiency of the market for corporate control. Stronger legal investor protection limits the ease with which an acquirer, once in control, can extract private benefits at the expense of non-controlling investors. This increases the acquirer’s capacity to raise outside funds to finance the takeover. Absent effective competition for the...

Tim Adam (Humboldt University of Berlin) discussing Wei Wang on 'How Costly is Corporate Bankruptcy to Top Executives?'

Tim Adam (Humboldt University of Berlin) discussing Wei Wang on 'How Costly is Corporate Bankruptcy to Top Executives?'

Wei Wang (Queen's University) presenting 'How Costly is Corporate Bankruptcy to Top Executives?', a paper on large-sample estimates of CEO personal bankruptcy costs that, for the first time, account for the CEO's post-bankruptcy employment income. The authors track CEO employment changes using 342 U.S. public companies filing for Chapter 11 between 1995 and 2008. Surprisingly, one-half of the incumbent CEOs maintain full-time employment - in sharp contrasts with the zero reemployment rate...

Wei Wang (Queen's University) presenting 'How Costly is Corporate Bankruptcy to Top Executives?', a paper on large-sample estimates of CEO personal bankruptcy costs that, for the first time, account for the CEO's post-bankruptcy employment income. The authors track CEO employment changes using 342 U.S. public companies filing for Chapter 11 between 1995 and 2008. Surprisingly, one-half of the incumbent CEOs maintain full-time employment - in sharp contrasts with the zero reemployment rate...