We argue that the recent corporate governance reform in the Netherlands provides a natural experiment to explore the impact of changes in corporate governance on financing policy. We find that, relative to a control sample of comparable firms outside the Netherlands, Dutch firms significantly...

We analyze financial support for the entrepreneurial sector. State support can raise welfare by relaxing financial constraints, but it can also reduce lending standards if entrepreneurs substitute public sources of collateral for their own assets, if it encourages excessive entrepreneurial...

This paper studies how sunk costs affect a financially constrained incumbent's ability to deter entry into its market. Sunk costs make it less attractive to the incumbent to accommodate entry by liquidating assets in place and exiting the market. This may render entry by a prospective rival...

Strategic investors, such as corporate venture capitalists, engage in the financing of start-up firms to complement their core businesses and to facilitate the internalization of externalities. We argue that while strategic objectives make it more worthwhile for an investor to elicit high...

We analyze the desirability of fair pricing of government guarantees for bank liabilities. Fair pricing is desirable only if the banking sector is sufficiently transparent. In opaque banking systems, fair pricing may exacerbate banks' incentive to take excessive risks.

We examine the impact of credit default swaps (CDS) on lending relationships and credit market efficiency. CDS insulate lenders against losses from forcing borrowers into default and liquidation. This improves the credibility of foreclosure threats, which can have positive implications for...