Risk-shifting, equity risk, and the distress puzzle
| dc.contributor.author | Li, Keming, author | |
| dc.contributor.author | Lockwood, Jimmy, author | |
| dc.contributor.author | Miao, Hong, author | |
| dc.contributor.author | Journal of Corporate Finance, publisher | |
| dc.date.accessioned | 2020-05-18T22:28:05Z | |
| dc.date.available | 2020-05-18T22:28:05Z | |
| dc.date.issued | 2017-06 | |
| dc.description | Includes bibliographical references (pages 22-24). | |
| dc.description | Published as: Journal of Corporate Finance, vol.44, June 2017, pp. 275-288, https://doi.org/10.1016/j.jcorpfin.2017.04.003. | |
| dc.description.abstract | Higher default probabilities are associated with lower future stock returns. The anomaly cannot be explained by strategic shareholder actions, traditional risk factors, characteristics, or mispricing, but, instead, is consistent with a risk-shifting hypothesis. Consistent with the risk-shifting hypothesis, we find that distressed firms tend to overinvest, destroy value, and exhaust their cash flows. Effects are concentrated in firms with wide credit spreads, firms with no convertible debt, and in cases where CEOs receive above-average equity-based compensation. As default risk rises, credit spreads rise, equity betas fall, and equity returns fall. | |
| dc.format.medium | born digital | |
| dc.format.medium | articles | |
| dc.identifier.bibliographicCitation | Li, K., Lockwood, J., & Miao, H. (2017). Risk-shifting, equity risk, and the distress puzzle. Journal of Corporate Finance, 44, 275–288. https://doi.org/10.1016/j.jcorpfin.2017.04.003 | |
| dc.identifier.uri | https://hdl.handle.net/10217/206881 | |
| dc.language | English | |
| dc.language.iso | eng | |
| dc.publisher | Colorado State University. Libraries | |
| dc.relation.ispartof | Faculty Publications | |
| dc.rights | ©2020 Elsevier B.V. Author can archive pre-print and post-print. | |
| dc.rights | Copyright and other restrictions may apply. User is responsible for compliance with all applicable laws. For information about copyright law, please see https://libguides.colostate.edu/copyright. | |
| dc.subject | financial distress | |
| dc.subject | bankruptcy | |
| dc.subject | risk-shifting | |
| dc.subject | credit spreads | |
| dc.title | Risk-shifting, equity risk, and the distress puzzle | |
| dc.type | Text |
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