ABSTRACT We investigate the effect of growth opportunities in a firm's investment opportunity set on its joint choice of leverage, debt maturity, and covenants. Using a database that contains detailed debt covenant information, we provide large‐sample evidence of the incidence of covenants in public debt and construct firm‐level indices of bondholder covenant protection. We find that covenant protection is increasing in growth opportunities, debt maturity, and leverage. We also document that the negative relation between leverage and growth opportunities is significantly attenuated by covenant protection, suggesting that covenants can mitigate the agency costs of debt for high growth firms.

Abstract This paper investigates the effect of closed overnight exchanges on option prices. During the trading day, asset prices follow the literature's standard affine model that allows for stochastic volatility and random jumps. Independently, the overnight asset price process is modeled by a single jump. We find that the overnight component reduces the variation in the random jump process significantly. However, neither the random jumps nor the overnight jumps alone are able to empirically describe all features of option prices. We conclude that both random jumps during the day and overnight jumps are important in explaining option prices, where the latter account for about one quarter of total jump risk.

Abstract This study compares the predictions of institutional theory with those of the contingency perspective of strategic human resource management (SHRM) on the selection of an employment mode. Empirical data were collected from multinational enterprises, including the electronics and garment industries, that operate in China to test the relative importance of the determinants of the selection of an employment mode. The results provide greater support for the SHRM predictions than for the institutional theory predictions. The implications of the findings for researchers and practitioners are discussed. Copyright © 2007 John Wiley & Sons, Ltd.

This study reanalyzes data from Tepper's (2000) two-wave study regarding the effects of subordinates' perceptions of supervisory abuse to assess previously unexamined relationships. As predicted, we found that subordinates who more rather than less strongly perceived that they had been abused by supervisors tended to use regulative maintenance tactics with higher frequency. Further, the positive relationship between abusive supervision and subordinates' psychological distress was exacerbated by subordinates' use of regulative maintenance communications, and that relationship was reduced by subordinates' use of direct maintenance communication. Theoretical and practical implications are discussed.

Most bank merger studies do not control for hidden bailouts, which may lead to biased results. In this study we employ a unique data set of approximately 1000 mergers to analyze the determinants of bank mergers. We use undisclosed information on banks’ regulatory intervention history to distinguish between distressed and non-distressed mergers. Among merging banks, we find that improving financial profiles lower the likelihood of distressed mergers more than the likelihood of non-distressed mergers. The likelihood to acquire a bank is also reduced but less than the probability to be acquired. Both distressed and non-distressed mergers have worse CAMEL profiles than non-merging banks. Hence, non-distressed mergers may be motivated by the desire to forestall serious future financial distress and prevent regulatory intervention.