Using merger announcements and applying methods from computational linguistics we find strong evidence that stock prices underreact to information in financial media. A one standard deviation increase in the media-implied probability of merger completion increases the subsequent 12-day return of a long-short merger strategy by 1.2 percentage points. Filtering out the 28% of announced deals with the lowest media-implied completion probability increases the annualized alpha from merger arbitrage by 9.3 percentage points. Our results are particularly pronounced when high-yield spreads are large and on days when only few merger deals are announced.

This paper shows that short debt maturities commit equityholders to leverage reductions when refinancing expiring debt in low-profitability states. However, shorter maturities lead to higher transaction costs since larger amounts of expiring debt need to be refinanced. We show that this trade-off between higher expected transaction costs against the commitment to reduce leverage in low-profitability states motivates an optimal maturity structure of corporate debt. Since firms with high costs of financial distress and risky cash flows benefit most from committing to leverage reductions, they have a stronger motive to issue short-term debt. Evidence supports the model’s predictions.

This article shows that, for major equity markets, the proportion of index values attributable to the first 5 years of dividends dropped substantially in the first quarter of 2020 and that this drop was not reversed by the end of the year. In the cross section, this breakdown of dividend smoothing due to COVID-19 was less severe for firms with higher operating cash flows and more positively coskewed stock returns, and it was more pronounced for those with higher leverage and in the financial sector. Heavy dividend cutters also experienced a substantial increase in exposure to systematic risk.

We study whether firms spread out debt-maturity dates, which we call granularity of corporate debt. In our model, firms that are unable to roll over expiring debt need to liquidate assets. If multiple small asset sales are less inefficient than a single large one, it can be optimal to diversify debt rollovers across time. Using a large sample of corporate bond issuers during the 1991–2012 period, we establish novel stylized facts and evidence consistent with our model’s predictions. There is substantial heterogeneity (i.e., firms have both concentrated and dispersed debt structures). Debt maturities are more dispersed for larger and more mature firms and for firms with better investment opportunities, higher leverage, and lower profitability. During the recent financial crisis, firms with valuable investment opportunities implemented more dispersed maturity structures. Finally, firms manage granularity actively and adjust toward target levels.