We study debt and equity valuation when investors have private information and may exhibit differences of opinion. Our model generates several predictions that are consistent with empirical evidence but difficult to reconcile with traditional models. Belief dispersion relates to expected equity and debt returns in opposite directions. Similarly, expected debt (equity) returns typically increase (decrease) with default risk, though these relationships reverse for firms close to bankruptcy. Firms’ capital structures affect their valuations even without classical capital structure frictions (e.g., tax shields, distress costs) — when liquidity is higher in the equity than in the debt market, leverage can raise firm value.
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Faculty
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Conferences
- Accounting Summer Camp
- California Econometrics Conference
- California Quantitative Marketing PhD Conference
- California School Conference
- China India Insights Conference
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Initiative on Business and Environmental Sustainability
- Political Economics (2023–24)
- Scaling Geologic Storage of CO2 (2023–24)
- A Resilient Pacific: Building Connections, Envisioning Solutions
- Adaptation and Innovation
- Changing Climate
- Civil Society
- Climate Impact Summit
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- Earth’s Seafloor
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- Finance
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- Taking the Pulse of the Planet
- Urban Infrastructure
- Watershed Restoration
- Junior Faculty Workshop on Financial Regulation and Banking
- Ken Singleton Celebration
- Kreps Symposium
- Marketing Camp
- Quantitative Marketing PhD Alumni Conference
- Theory and Inference in Accounting Research
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Research Labs & Initiatives
- Cities, Housing & Society Lab
- Corporate Governance Research Initiative
- Corporations and Society Initiative
- Golub Capital Social Impact Lab
- Initiative for Financial Decision-Making
- Policy and Innovation Initiative
- Rapid Decarbonization Initiative
- Stanford Latino Entrepreneurship Initiative
- Value Chain Innovation Initiative
- Venture Capital Initiative
- Behavioral Lab
- Data, Analytics & Research Computing