We introduce ambiguity about the asset value dynamics of a firm into trade-off framework capital structure. characterize investors’ preferences by recursive multiple priors utility. show that equity holders’ aversion significantly reduces optimal leverage and debt capacity. In particular, holders with sufficiently strong perceive their to be “too valuable lose” upon bankruptcy therefore optimal...

Using the generalized extreme value theory to characterize tail distributions, we address liquidation, leverage, and optimal margins for bitcoin long short futures positions. The empirical analysis of perpetual on BitMEX shows that (1) daily forced liquidations out- standing are substantial at 3.51%, 1.89% short; (2) investors got liquidation do trade aggressively with average leverage 60X; (3)...

The common approach in empirical capital structure research has been to study the determinants of optimal leverage by studying the association between observed leverage and a set of explanatory variables. This approach has two major shortcomings. First, the observed leverage need not necessarily be the optimal leverage. Second, the empirical analyses, being effectively non-dynamic, are unable t...

Simulation results are reported on methods that allow both within group and between group heteroscedasticity when testing the hypothesis that independent groups have identical regression parameters. The methods are based on a combination of extant techniques, but their finite-sample properties have not been studied. Included are results on the impact of removing all leverage points or just bad ...

This study investigates whether deviation from target leverage (leverage adjustment speed) in firms with small positive earnings (i.e., SPOS) is higher (slower) than that of other firms. We find evidence suggesting that managers of SPOS manipulate sales, production processes, and discretionary expenses to avoid reporting losses. Our results show that deviation from target leverage in SPOS is hi...

This paper studies the optimal financing contract of a bank with risk-shifting incentives and private information, in an environment with macroeconomic uncertainty. Leverage mitigates adverse selection problems owing to debt information-insensitivity, but leads to excessive risk-taking. I show that the optimal leverage is procyclical in the laissez-faire equilibrium, and contingent convertible ...