| Summary: | 碩士 === 臺灣大學 === 財務金融學研究所 === 95 === Among the first studies, we examine the impacts on the equity returns from three credit risk dimensions measured as relative leverage (the distance to optimal leverage), solvency ratio, and collateral to asset, representing long-term default risk, short-term liquidity risk, and bargaining power of debt holders, respectively. We analyze the effects of these risks to both bondholders and stockholders. Our empirical investigation shows that a firm in the state of high credit risk, perhaps demanded by debt holder, tends to make a balance between these risk dimensions. In addition, we also find that equity returns exhibit a hump shape when relative leverage increases, a smile pattern when solvency ratio decreases, and a smile pattern too when collateral to asset increases, respectively.
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