In this paper, we develop a dynamic model of institutional share dumping surrounding control events. Uninformed institutional investors dump shares, despite trading losses, in order to manipulate share prices and trigger activism by activist quot;relationshipquot; investors. Nonactivist...

This paper develops a new theory of the capital structure of parent--subsidiary organizations based on legal-system arbitrage: The capital structure of parent--subsidiary organizations is chosen to minimize the agency costs generated by selective renegotiation of claims written on the component...

This paper models the real investment and financial portfolio decisions of a regulated utility, selling power at fixed prices to consumers and buying power in an unregulated spot market. Consumer demand is stochastic and subject to large shocks. Utilities can either meet consumers' demand by...

This paper model the real investment and financial portfolio decisions of a regulated utility, selling power at fixed prices to consumers and buying power in an unregulated spot market. Consumer demand is stochastic and subject to large shocks. Utilities can either meet consumers' demand by...

We show that seasoned equity offerings (SEOs), in which secondary share-offering size greatly exceeds market share turnover, provide a unique opportunity for stock price manipulation by speculators holding restricted shares. The proposed new theory is consistent with several puzzling empirical...

This study finds a significant and pervasive decline but not an elimination of CEO optionbased compensation after the corporate governance scandals around 2000-2001 centered on executive option compensation. Some, but not all, of the drop is predicted by changes in the characteristics of firms,...

This paper considers lending to finance projects in a setting where repayment enforcement appears impossible. The loan was illegal and thus legally unenforceable. Creditors were incapable of applying private coercion to force repayment. Borrowers lacked both collateral and reputation capital....

We propose a security design model in which a potential acquirer approaches a firm with a value-add plan. The target has a single owner, who possesses private information: he knows whether his firm is compatible with the plan, or not. The seller agrees the acquirer will add value but not as much...

Uncompetitive contests for grades, promotions, retention, and job assignments, which feature lax standards and limited candidate pools, are often criticized for being unmeritocratic. We show that, when contestants are strategic, lax standards and exclusivity can make selection more meritocratic....