Existing theories of debt consider a single contractible performance measure ("output''). In reality, other performance signals are available. It may seem that debt is no longer optimal: if the signals are sufficiently positive, the manager should receive a payment even if output is low.
This paper shows that debt remains the optimal contract under additional signals -- they only affect the contractual debt repayment, but not the form of the contract. However, some informative signals will not be used in debt contracts. We show how the contractual debt repayment should depend on valuable signals, providing a theory of performance-sensitive debt.
Prior research has documented a carbon premium in realized returns, which has been assumed to proxy for expected returns and thus the cost of capital. We...
The large companies that currently file for Chapter 11 look very different than the typical Chapter 11 cases of the past. The liability side of debtors’...
This paper measures diversity, equity, and inclusion (DEI) using proprietary data on survey responses used to compile the Best Companies to Work For...