[We investigate the trade-off between incentive provision and inefficient rollover freezes for a firm financed with short-term debt. First, debt maturity that is too short-term is inefficient, even with incentive provision. The optimal maturity is an interior solution that avoids excessive rollover risk while providing sufficient incentives for the manager to avoid riskshifting when the firm is in good health. Second, allowing the manager to risk-shift during a freeze actually increases creditor confidence. Debt policy should not prevent the manager from holding what may appear to be otherwise low-mean strategies that have option value during a freeze. Third, a limited but not perfectly reliable form of emergency financing during a freeze—a "bailout"—may improve the terms of the trade-off and increase total ex ante value by instilling confidence in the creditor markets. Our conclusions highlight the endogenous interaction between risk from the asset and liability sides of the balance sheet.]

We reexamine the post-listing puzzle by studying the stock performance of 2103 firms that moved from NASDAQ to NYSE or AMEX, or from AMEX to NYSE during 1973–1999. The matched four-factor regressions demonstrate that the listing firms do not underperform. Size-and-book-to-market matched factor regression finds that the “post-listing drift” is confined to the small set of firms moving from NASDAQ to AMEX during 1981–1990, within size deciles 3–6 and book-to-market quintiles 1–3. A further control of the industry effect is able to resolve the remaining abnormal returns. Our results are consistent with the pseudo market timing hypothesis in Schultz, (2003) [Schultz, P., 2003. Pseudo market timing and the long-run underperformance of IPOs. J. Fin. 58, 483–517.].

Financial ratios, Bond rating, Credit risk, Bankruptcy

Results of research on whether changes in earnings can predict future stock returns are inconclusive. We add to this debate by using long-term data from 1871 to 2004 to examine the predictive power of changes in earnings in periods of intrinsic bubbles and in periods absent intrinsic bubbles. Our results show that accounting for bubbles is important in whether changes in earnings can predict future stock returns. In periods of no bubble, we find that changes in earnings Granger-cause future returns, whereas in periods of bubble, this Granger causality from changes in earnings to future returns cannot be found. We conclude that changes in earnings can predict future stock returns, but only in periods absent bubbles.

Cheng-Few Lee, J. Kenton Zumwalt, Associations Between Alternative Accounting Profitability Measures and Security Returns, The Journal of Financial and Quantitative Analysis, Vol. 16, No. 1 (Mar., 1981), pp. 71-93

Cheng F. Lee, Frank C. Jen, Effects of Measurement Errors on Systematic Risk and Performance Measure of a Portfolio, The Journal of Financial and Quantitative Analysis, Vol. 13, No. 2 (Jun., 1978), pp. 299-312

Hui-shyong Chang, Cheng F. Lee, Using Pooled Time-Series and Cross-Section Data to Test the Firm and Time Effects in Financial Analyses, The Journal of Financial and Quantitative Analysis, Vol. 12, No. 3 (Sep., 1977), pp. 457-471

Cheng F. Lee, William P. Lloyd, The Capital Asset Pricing Model Expressed as a Recursive System: An Empirical Investigation, The Journal of Financial and Quantitative Analysis, Vol. 11, No. 2 (Jun., 1976), pp. 237-249