If debt capacity is defined as the incremental debt that is optimally associated with an additional asset, then the debt capacity of growth options is negative. Underinvestment costs of debt increase and free cash flow benefits of debt fall with additional growth options. Thus, if firm value...

The differences between ECNs and Nasdaq market makers are used to formulate and test several hypotheses about the choice of trading venue and the importance of ECN trades in the price discovery process. Trades are more likely to occur on ECNs when spreads are narrow and when trading volume and...

We compare the execution quality of trades with market makers to trades executed on Electronic Communications Networks (ECNs). Average quoted, realized, and effective spreads are smaller for ECN trades than for market-maker trades even though ECN trades are more informative than trades with...

It is widely held that for tax reasons corporate shareholders are the only shareholders that prefer dividends to capital gains. This has led to clientele models where corporate blockholders migrate to firms paying dividends and use their voting power to increase dividends in these firms. We use...

We relate the value of growth options in the firm's investment opportunity set to the level of debt in the firm's capital structure. Underinestment costs of debt increase and free cash flow benefits fall with additional growth options. Thus, if debt capacity is defined as the amount of debt the...

There are two ways to buy a large-percentage block of stock - from another shareholder or directly from the corporation. Because the traded asset is the same, one might expect the pricing of these transactions to be similar. Block trades, however, are priced at an 11% premium to the...

This paper examines the trading process outside of normal trading hours. Although after-hours trading volume is small, after-hours trades are more informative than trades during the day, and are associated with significant price discovery. Spread-related trading costs are also more than twice as...

We show that the greater the extent to which a performance measure matches delivered performance, the simpler and more robust are the compensation plans based on it. In some settings stock price changes match delivered performance poorly because they anticipate it. This introduces three problems...

Current theories of capital structure have difficulty explaining the aspects of financing behavior we document. In contrast to the tradeoff theory, seasoned equity offers frequently move firms away from their target leverage ratios. At odds with the pecking-order theory, SEO firms typically are...