Financial Distress and the Cross‐section of Equity Returns
在简单股权估值模型中引入财务杠杆，考察财务困境解决时股东回收的横截面影响，解释了困境股低收益、高违约公司账面市值比效应更强以及低信用质量公司动量利润集中等现象。
ABSTRACT We explicitly consider financial leverage in a simple equity valuation model and study the cross‐sectional implications of potential shareholder recovery upon resolution of financial distress. Our model is capable of simultaneously explaining lower returns for financially distressed stocks, stronger book‐to‐market effects for firms with high default likelihood, and the concentration of momentum profits among low credit quality firms. The model further predicts (i) a hump‐shaped relationship between value premium and default probability, and (ii) stronger momentum profits for nearly distressed firms with significant prospects for shareholder recovery. Our empirical analysis strongly confirms these novel predictions.