We consider a setting in which insiders have information about income that outside shareholders do not, but property rights ensure that outside shareholders can enforce a fair payout. To avoid intervention, insiders report income consistent with outsiders' expectations based on publicly...

We model a situation where the entrepreneur has an informational advantage during the early stages of an investment project while the venture capitalist has the informational advantage during the later stages. We examine how this evolution of informational asymmetry affects venture investment...

The allocation of control rights in a venture does not matter if partners have congruent preferences. This Paper develops a theory of control as a signal of congruence, and applies it to the structure of alliances between a privately informed ‘entrepreneur’ (technology firm) and an...

In this paper we analyse the frequently observed phenomenon that (i) some members of a team ('black sheep') exhibit behaviour disliked by other (honest) team members, who (ii) nevertheless refrain from reporting such misbehaviour to the authorities (they set up a 'wall of silence'). Much cited...

This paper provides a theory of venture capital financing based on the complementarity between the financing and advising roles of venture capitalists. We examine the interaction between the staging of investment that characterizes young firms with a high growth potential and the double-sided...

This paper studies a credit market with adverse selection and moral hazard where sufficient sorting is impossible. The crucial novel feature is the competition between lenders in their choice of contracts offered. The quality of investment projects is unobservable by banks and entrepreneurs’...

We consider the debt capacity of a risky asset when debt is being rolled over and there is a liquidation cost in case of default. We show that debt capacity depends on how information about the quality of the asset is revealed. When the information structure is based on “optimistic”...

The restructuring of a bankrupt company often entails its sale. This Paper suggests a way to sell the company that maximizes the creditors' proceeds. The key to this proposal is the option left to the creditors to retain a fraction of the shares of the company. Indeed, by retaining the minority...

This paper proposes an explanation of merger waves based on the interaction between competitive pressure and irreversibility of mergers in an uncertain environment. A set of acquirers compete over time for scarce targets. At each point in time, an acquirer can either postpone a takeover attempt,...

Capacity addition and withdrawal decisions are among the most important strategic decisions made by firms in oligopolistic industries. In this paper, we develop and analyze a fully dynamic model of an oligopolistic industry with lumpy capacity and lumpy investment/disinvestment. We use our model...