We analyze the implications of entrepreneurial spawning for a variety of firm characteristics such as size, focus, profitability, and innovativeness. We examine the dynamics of spawning over time. Our model accounts for much of the empirical evidence relating to the relation between spawning and...

Active fund managers implicitly promise to research profitable portfolio selection. But active management is an experience good subject to moral hazard. Investors cannot tell high from low quality up front and therefore fear manager shirking. We show how the parties mitigate the moral hazard by...

We seek to account for the very high levels of public debt recently reached in many OECD countries. We do so by assuming that governments do their utmost to stave off default, which occurs only when a government fails to muster the funds needed for debt service. This distinguishes our work from...

When should shareholders afford a manager the discretion to be opportunistic and when should they constrain him to be principled? We show that discretion is associated with lower powered incentives than is constraint: opportunism may put shareholder capital at risk; shareholder can lessen that...

The public and private sector costs of capital differ in the presence of taxes, because taxes are a cost to the private but not the public sector. We use a quasi-arbitrage approach to show how to include taxes in a comparison of capital costs. We find that taxes induce distortions that generate...

We examine the roles of bank ownership and CEO political faction membership in facilitating or hindering the implementation of central bank policy in China. Specifically, we examine the response of China’s commercial banks to People’s Bank of China (PBC) guidelines intended to decrease...