Macroeconomic conditions and the puzzles of credit spreads and capital structure

Journal of Finance

Volumn 65, Issue 6, 2010, Pages 2171-2212

  Chen, Hui ^a  

^a MASSACHUSETTS INSTITUTE OF TECHNOLOGY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 78249234393     PISSN: 00221082     EISSN: 15406261     Source Type: Journal    
DOI: 10.1111/j.1540-6261.2010.01613.x     Document Type: Article

References (52)

1. Acharya, Viral V., Sreedhar T. Bharath, and Anand Srinivasan, 2007, Does industry-wide distress affect defaulted firms? Evidence from creditor recoveries, Journal of Financial Economics 85, 787-821.
2. Almeida, Heitor, and Thomas Philippon, 2007, The risk-adjusted cost of financial distress, Journal of Finance 62, 2557-2586.
3. Altinkilic, Oya, and Robert S. Hansen, 2000, Are there economies of scale in underwriting fees? Evidence of rising external financing costs, Review of Financial Studies 13, 191-218.
4. Altman, Edward, Brooks Brady, Andrea Resti, and Andrea Sironi, 2005, The link between default and recovery rates: Theory, empirical evidence and implications, Journal of Business 78, 2203-2227.
5. Andrade, Gregor, and Steven N. Kaplan, 1998, How costly is financial (not economic) distress? Evidence from highly leveraged transactions that became distressed, Journal of Finance 53, 1443-1493.
6. Asquith, Paul, Robert Gertner, and David Scharfstein, 1994, Anatomy of financial distress: An examination of junk-bond issuers, Quarterly Journal of Economics 109, 625-658.
7. Bansal, Ravi, and Amir Yaron, 2004, Risks for the long run: A potential resolution of asset pricing puzzles, Journal of Finance 59, 1481-1509.
8. Berndt, Antje, Rohan Douglas, Darrell Duffie, Mark Ferguson, and David Schranz, 2008, Measuring default risk premia from default swap rates and EDFs, Working paper, Stanford University
9. Bhamra, Harjoat S., Lars-Alexander Kuehn, and Ilya A. Strebulaev, 2010, The levered equity risk premium and credit spreads: A unified framework, Review of Financial Studies 23, 645-703.
10. Brennan, M. J., and E. S. Schwartz, 1978, Corporate income taxes, valuation, and the problem of optimal capital structure, Journal of Business 51, 103-114.
11. Campbell, John Y., and John H. Cochrane, 1999, By force of habit: A consumption based explanation of aggregate stock market behavior, Journal of Political Economy 107, 205-251.
12. Chapman, David A., 1997, The cyclical properties of consumption growth and the real term structure, Journal of Monetary Economics 39, 145-172.
13. Chen, Hui, 2007, Macroeconomic conditions, corporate financing decisions, and credit risk, Ph.D. Thesis, Graduate School of Business, University of Chicago
14. Chen, Long, Pierre Collin-Dufresne, and Robert S. Goldstein, 2009, On the relation between the credit spread puzzle and the equity premium puzzle, Review of Financial Studies 22, 3367-3409.
15. Cochrane, John H., 2008, Financial markets and the real economy, in Rajnish Mehra, ed. Handbook of the Equity Risk Premium (Elsevier, Amsterdam, Netherlands).
16. Davydenko, Sergei A., 2007, When do firms default? A study of the default boundary, Working Paper, University of Toronto
17. Driessen, Joost, 2005, Is default event risk priced in corporate bonds Review of Financial Studies 18, 165-195.
18. Duffee, Gregory R., 1998, The relation between treasury yields and corporate bond yield spreads, Journal of Finance 53, 2225-2241.
19. Duffie, Darrell, 2001, Dynamic Asset Pricing Theory (Princeton University Press, Princeton and Oxford).
20. Duffie, Darrell, and Larry G. Epstein, 1992a, Asset pricing with stochastic differential utility, Review of Financial Studies 5, 411-436.
21. Duffie, Darrell, and Larry G. Epstein, 1992b, Stochastic differential utility, Econometrica 60, 353-394.
22. Duffie, Darrell, and David Lando, 2001, Term structures of credit spreads with incomplete accounting information, Econometrica 69, 633-664.
23. Duffie, Darrell, and Costis Skiadas, 1994, Continuous-time security pricing: A utility gradient approach, Journal of Mathematical Economics 23, 107-132.
24. Epstein, Larry G., and Stanley Zin, 1989, Substitution, risk aversion, and the temporal behavior of consumption growth and asset returns I: A theoretical framework, Econometrica 57, 937-969.
25. Fischer, Edwin O., Robert Heinkel, and Josef Zechner, 1989, Dynamic capital structure choice: Theory and tests, Journal of Finance 44, 19-40.
26. Gilson, Stuart C., 1997, Transactions costs and capital structure choice: Evidence from financially distressed firms, Journal of Finance 52, 161-196.
27. Goldstein, Robert, Nengjiu Ju, and Hayne Leland, 2001, An EBIT-based model of dynamic capital structure, Journal of Business 74, 483-512.
28. Graham, John R., 2000, How big are the tax benefits of debt Journal of Finance 55, 1901-1941.
29. Hackbarth, Dirk, Jianjun Miao, and Erwan Morellec, 2006, Capital structure, credit risk, and macroeconomic conditions, Journal of Financial Economics 82, 519-550.
30. Hansen, Lars Peter, John C. Heaton, and Nan Li, 2008, Consumption strikes back? Measuring long-run risk, Journal of Political Economy 116, 260-302.
31. Huang, Jingzhi, and Ming Huang, 2003, How much of the corporate-treasury yield spread is due to credit risk? Working paper, Stanford University
32. Jarrow, Robert A., David Lando, and Stuart M. Turnbull, 1997, A Markov model for the term structure of credit risk spreads, Review of Financial Studies 10, 481-523.
33. Jensen, Michael C., and William H. Meckling, 1976, Theory of the firm: Managerial behavior, agency costs and ownership structure, Journal of Financial Economics 3, 305-360.
34. Jobert, Arnaud, and L. C. G. Rogers, 2006, Option pricing with Markov-modulated dynamics, SIAM Journal on Control and Optimization 44, 2063-2078.
35. Karatzas, Ioannis, and Steven E. Shreve, 1991, Brownian Motion and Stochastic Calculus (Springer, New York, NY).
36. Korteweg, Arthur G., 2010, The net benefits to leverage, Journal of Finance 65, 2137-2170.
37. Kreps, David M., and Evan L. Porteus, 1978, Temporal resolution of uncertainty and dynamic choice theory, Econometrica 46, 185-200.
38. Leary, Mark T., and Michael R. Roberts, 2005, Do firms rebalance their capital structures Journal of Finance 60, 2575-2619.
39. Leland, Hayne, 1994, Corporate debt value, bond covenants, and optimal capital structure, Journal of Finance 49, 1213-1252.
40. Leland, Hayne, 1998, Agency costs, risk management, and capital structure, Journal of Finance 53, 1213-1243.
41. Leland, Hayne, and Klus Bjerre Toft, 1996, Optimal capital structure, endogenous bankruptcy, and the term structure of credit spreads, Journal of Finance 51, 987-1019.
42. Longstaff, Francis A., Sanjay Mithal, and Eric Neis, 2005, Corporate yield spreads: Default risk or liquidity? New evidence from the credit default swap market, Journal of Finance 60, 2213-2253.
43. Miller, Merton H., 1977, Debt and taxes, Journal of Finance 32, 261-275.
44. Myers, Stewart, 1977, Determinants of corporate borrowing, Journal of Financial Economics 5, 147-175.
45. Pástor, Lubos, and Pietro Veronesi, 2005, Rational IPO waves, Journal of Finance 60, 1713-1757.
46. Piazzesi, Monika, and Martin Schneider, 2006, Equilibrium yield curves, NBER Macroeconomics Annual.
47. Shleifer, Andrei, and Robert W. Vishny, 1992, Liquidation values and debt capacity: A market equilibrium approach, Journal of Finance 47, 1343-1366.
48. Strebulaev, Ilya A., 2007, Do tests of capital structure theory mean what they say Journal of Finance 62, 1747-1787.
49. Tauchen, George, and Robert Hussey, 1991, Quadrature based methods for obtaining approximate solutions to nonlinear asset pricing models, Econometrica 59, 371-396.
50. Van Binsbergen, Jules H., John R. Graham, and Jie Yang, 2010, The cost of debt, Journal of Finance 65, 2089-2136.
51. Weil, Philippe, 1990, Non-expected utility in macroeconomics, Quarterly Journal of Economics 105, 29-42.
52. Welch, Ivo, 2004, Capital structure and stock returns, Journal of Political Economy 112, 106-131.