This paper studies liability management exercises (LME) by banks, which have comparable regulatory capital effects than contingent capital triggers. LMEs are concentrated on low capitalization situations, both in the cross-section and in the time series and are frequently associated with equity issuances. These exercises prove effective at improving bank capitalization levels. The market reaction to LMEs is positive and mostly accrues to debt holders. These findings strengthen the case for innovative liabilities securities as a tool to improve bank resilience. Received February 8, 2019; editorial decision May 16, 2019 by Editor Andrew Ellul

From 2007 to 2016, S&P 500 firms distributed $7 trillion via buybacks and dividends, over 96% of their aggregate net income, prompting claims that “short-termism” is impairing firms’ ability to invest and innovate. We show that, accounting for both direct and indirect equity issuances, net shareholder payouts by all public firms during this period totaled only 41% of net income. And, during this decade, investment substantially increased while cash balances ballooned. In short, S&P 500 shareholder-payout figures cannot provide much basis for the notion that short-termism has been depriving public firms of needed capital. Received September 23, 2018; Editorial decision November 13, 2018; Editor Andrew Ellul