{"title":"The Expected Recovery Rate and the Probability of Default on High Yield Debt","authors":"John J. Binder","doi":"10.2139/ssrn.997180","DOIUrl":"https://doi.org/10.2139/ssrn.997180","url":null,"abstract":"Several studies find a negative relation between the recovery rate and the default rate on high yield debt. It has been argued that this is due to inelastic demand for defaulted debt. This paper shows, based on definitional relations in the bond market, that the expected recovery rate is positively related (everything else equal) to the ex ante probability of default. Empirical evidence supports the model and indicates that it is useful in explaining the default rate as well as the recovery rate.","PeriodicalId":359478,"journal":{"name":"UIC: Finance (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2008-01-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131216348","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Does it Pay to Consistently Meet Analysts' Earnings Expectations?","authors":"Gia Chevis, Somnath Das, S. Sivaramakrishnan","doi":"10.2139/ssrn.982841","DOIUrl":"https://doi.org/10.2139/ssrn.982841","url":null,"abstract":"In this paper, we investigate the market reward to firms that consistently meet or exceed analysts' consensus forecasts over the entire horizon over which a pattern of consistent meet/beat is exhibited. Our results support the existence of a positive market response over the entire horizon. We document that this incremental valuation premium increases with the length of the strategy horizon over which MEET behavior persists, and that MEET firms enjoy significantly higher valuations of income and book value of equity than do NONMEET firms. Finally, we document that there has been a temporal shift in the way the market values the MEET strategy in that there is greater premium (penalty) for meeting /beating (missing) of earnings expectations.","PeriodicalId":359478,"journal":{"name":"UIC: Finance (Topic)","volume":"17 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2007-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127620346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Optimal Multi-Agent Performance Measures for Team Contracts","authors":"J. Sung, H. Koo, G. Shim","doi":"10.2139/ssrn.944744","DOIUrl":"https://doi.org/10.2139/ssrn.944744","url":null,"abstract":"We present a continuous-time contracting model under moral hazard with many agents. The principal contracts many agents as a team, and they jointly produce correlated outcomes. We show the optimal contract for each agent is linear in outcomes of all other agents as well as his/her own. The structure of the optimal contract strikingly reveals that the optimal aggregate performance measure in general can be orthogonally decomposed into two statistics: one is a sufficient statistic, and the other a non-sufficient statistic. As a consequence, the optimal aggregate performance measure in general is not a sufficient statistic, except when the principal is risk neutral. We further discuss agents' optimal effort choices using a \"quadratic-cost\" example, which also strikingly suggests that team contracts sometimes provide lower-powered effort incentives than individually separate contracts do.","PeriodicalId":359478,"journal":{"name":"UIC: Finance (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2006-11-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127868676","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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