Sky Blog
The U.S. leveraged (high-yield) loan market has more than doubled since the Great Financial Crisis (GFC), with nearly $1.2 trillion in outstanding debt in 2019 (Leveraged Commentary and Analysis, LCD). The rise in high-yield corporate debt (bonds included) in the …
In a new paper, The Leverage Effect of Bank Disclosures, we challenge the widespread view that disclosure requirements prompt banks to reduce their risk and leverage. That view has prevailed since at least 2004, when the Basel Committee introduced Pillar …
The COVID-19 pandemic and efforts to combat its spread were an unprecedented shock to corporate cash flows and consequent need for external financing. How did corporate leverage respond? More important, what does the impact on leverage mean for financial stability? …
In a widely anticipated action that was years in the making, the SEC adopted Rule 18f-4 under the 1940 Act prior to the conclusion of former Chair Jay Clayton’s tenure. The rule overhauls the regulatory framework for the use of …
In a new paper, we explain that variation in prospective liquidity in an industry or economy prompts changes in corporate lending and banking, including changes in the level of corporate borrowing, the type of debt contracts issued, the covenants contained …
Several decades of research have found that capital structure and financing decisions are influenced not only by market frictions such as taxes and bankruptcy costs but also by conflicts between managers and shareholders. In a new paper, we test whether …
The manner in which financial firms are governed directly affects the stability and sustainability of both the financial sector and the “real” economy, as the financial crisis and associated regulatory reform efforts have tragically demonstrated. However, two fundamental tensions continue …
Traditional explanations for why companies choose certain financial policies focus on firm-specific factors. For instance, all else being equal, firms with higher tax rates are likely to favor debt financing over equity financing, given the tax advantages of debt. However, …
The Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Act”), which became law on May 24, contains the first major package of revisions to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The Act …
The credit bull market charged through 2017, with many terrific outcomes for opportunistic borrowers. But even in the best of times, borrowers and their advisors should remain nimble and thoughtful, and 2018 brings much to consider, including the impact on …
A recent enforcement action reflects the CFTC’s expanded jurisdiction and provides further clarity on what constitutes “actual delivery” in cryptocurrency trading.
On June 2, 2016, the US Commodity Futures Trading Commission (CFTC) issued an order (the Bitfinex Order) filing, and …
On January 7th 2016, Thomson Reuters and the National Venture Capital Association (NVCA) published their Exit Poll Report, which stated that in the U.S. 77 venture capital (VC)-backed initial public offerings (IPOs) raised $9.4 billion in 2015. Over …
A widely-held view in financial economics is that CEOs holding a non-diversified wealth portfolio tied to the firm are likely to be more risk-averse when making corporate decisions than what diversified shareholders would prefer. To reduce this divergence in attitude …
Debt has undergone a remarkable resurrection in relation to banks’ capital structures. In the immediate aftermath of the crisis it was uncertain whether debt would survive at all in the Basel Committee’s minimum capital requirements for internationally active banks. Today, …
How different is private equity from Berkshire Hathaway? The phrase “private equity” has a certain ring to it, suggesting providing shareholder capital to buy and hold businesses. In fact, most private equity firms use substantial debt to acquire companies, charge …