A Resolution of the Distress Risk and Leverage Puzzles in the Cross Section of Stock Returns

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Variable selection and corporate bankruptcy forecasts (2015, background): “In addition, a firm with higher bankruptcy costs has more incentives to lower its bankruptcy risk by taking precautionary actions, for example, adopting low target leverage or taking low-risk project (e.g., George and Hwang, 2010).”
Leverage change, debt overhang, and stock prices (2011, background): “For example, Titman and Wessels (1988) and George and Hwang (2010) show that firms with high financial distress costs tend to have lower debt ratios.”
Clientele Change, Liquidity Shock, and the Return on Financially Distressed Stocks (2010, methodology): “For instance, Dichev (1998), Griffin and Lemmon (2002), and George and Hwang (2010) use accounting bankruptcy measures for distress risk such as Altman’s (1968) Z-score and Ohlson’s (1980) O-score; Garlappi et al. (2008) use Moody’s KMV’s expected default frequenciesTM; Campbell, Hilscher, et al.…”
Size matters, if you control your junk (2018, background): “…Wurgler, 2002; Pontiff and Woodgate, 2008 ), low risk ( Ang et al., 2006, 2009; Black et al., 1972; Frazzini and Pedersen, 2014 ), low leverage ( George and Hwang, 2010 ; Penman et al., 2007 ), low credit risk ( Altman, 1968; Ohlson, 1980; Campbell et al., 2008 ), and good governance ( Gompers…”