, and it also has a positive and significant effect on their market values. Our results are consistent with the theory that …

We develop a dynamic model of investment, cash holdings, financing, and risk management policies in which firms face …-flow sensitivity of cash display a more realistic behavior than in prior models with financing frictions. In addition, risk management …

theory of investment and dividend policy, where dividends are paid by self-interested CEOs to maintain a balance between …

which the objectives of managers and entrepreneurs in choosing the risk composition of their firms' returns are not aligned … managers and entrepreneurs to unhedgeable firm-specific risk, induces them to change the stochastic properties of firm cash … flows. Since they can trade in markets for aggregate risk but not for firm-specific risk, managers and entrepreneurs produce …

We study empirically the effect of focus (specialization) versus diversification on the return and the risk of banks … industries, to different sectors and to different geographical regions. Our results are consistent with a theory that predicts a … deterioration in bank monitoring quality at high levels of risk and a deterioration in bank monitoring quality upon lending …