We examine the effect of investment lumpiness on firms' default risk. A structural model is established and shows that firms with lumpier (or more indivisible) investments will encounter higher credit risk, all else being equal. We use the model solutions to simulate investment and default dynamics for a variety of firms structurally similar to their empirical counterparts. Using the relative size of investments, time between investments, and the skewness of investment rates as the proxies of investment lumpiness, the regression exercises of the simulated samples demonstrate that the degree of lumpiness is monotonically related to the probability of default. The models' implications are generally supported by reduced-form tests using actual data. This article sheds new light on the linkage between firms' investment patterns and default risk.

We examine liquidity-related characteristics of U.S. firms with cross-listed shares in 20 foreign markets in the 1950–2013 period. We find that firms after foreign-market listing exhibit lower liquidity sensitivity and lower liquidity beta and suffer less from transitory price shocks. These results are stronger when firms are listed on multiple exchanges and in larger and more liquid markets. The liquidity enhancement is associated with firms’ increased foreign ownership postlisting and is effective for firms with high levels of volatility, foreign income, and foreign trading and a high probability of informed trading. Our findings provide support for global markets providing liquidity and reducing liquidity risk to U.S. firms.

Using global mutual fund and American Depositary Receipt (ADR) data, we test if funds strategically trade cross-listed firms’ equity shares in the most liquid trading location. We find that especially funds that score high on traditional skill measures exhibit a liquidity-based trading venue preference. We identify an informed trading motive as the most likely driver for such behaviour rather than preference based on geographic, economic, cultural, or governance motives. Thus, liquidity picking is associated with fund outperformance and stock selection ability that is not limited to only cross-listed firms. Our tests directly support theories of informed trading in a multi-market setting.

We examine the impact of monetary policy announcements by the Federal Open Market Committee (FOMC) on long-term US and German bond futures. Using transaction-level data during the post-financial crisis period, we observe a sizable post-announcement drift in government bond markets. A trading strategy of investing in the market after expansionary shocks and shorting the market following contractionary surprises yields up to four times the Sharpe ratio of buy-and-hold investment. The post-FOMC announcement drift coincides with more informative order flows in the post-announcement period, and it persists for 15 days. Moreover, our study shows an absence of pre-FOMC announcement drift. Our findings shed some light on how the bond markets react to public news arrival.

We study how listing in multiple markets affects the dynamics between firms’ credit default swap (CDS) and stock returns. We find that cross-listing increases (1) the sensitivity of CDS to stock returns, (2) the integration of CDS with world equity and bond markets, and (3) the statistical synchronicity of CDS and stock prices. Our results are stronger for firms with greater media attention, analyst and CDS coverage, and Google search intensity and for listings in familiar markets. We suggest that a firm’s presence in global equity markets comes with an improvement in the credit-equity integration through a reduction of informational frictions. Received April 20, 2017; editorial decision February 12, 2019 by Editor Andrew Karolyi.