We test under what circumstances boards discipline managers and whether such interventions improve performance. We exploit exogenous variation due to the staggered adoption of corporate governance laws in formerly Communist countries coupled with detailed ‘hard’ information about the...

Venture capitalists provide risk capital and valuable monitoring services that are essential for the success of upstart companies. The financial sector’s expertise in monitoring investment proposals may increase with the accumulated experience in funding such projects. In the other direction,...

We analyze a publicly-traded firm’s decision to stay public or go private when managerial autonomy from shareholder intervention affects the supply of productive inputs by management. We show that both the advantage and the disadvantage of public ownership relative to private ownership lie in...

When a young entrepreneurial firm matures, it is often necessary to replace the founding entrepreneur by a professional manager. This replacement decision can be affected by the private benefits of control enjoyed by the entrepreneur which gives rise to a conflict of interest between the...

This paper offers a new explanation for the prevalent use of convertible securities in venture capital finance. Convertible securities can be used to endogenously allocate cash flow rights as a function of the realized quality of the project. This property can be used to mitigate the double...

An interesting puzzle is that trade liberalization in the 1980s and 1990s has been associated with a sharp increase in the skill premium in both developed and developing countries. This is in contrast with neoclassical theory, according to which trade should increase the relative return of the...

This paper uses survey data for 60,000 households from 29 transition economies in 2006 and 2010 to explore how the use of banking services is related to household characteristics, as well as to bank ownership, deposit insurance and creditor protection. At the household level we find that the...

This paper surveys the evidence on the effectiveness of monetary transmission in developing countries. We summarize the arguments for expecting the bank lending channel to be the dominant means of monetary transmission in such countries, and present a simple model that suggests why this channel...

The response of an economy to a windfall of foreign exchange (be it aid or natural resource revenues) is often constrained by absorptive capacity. We provide a micro-founded analysis of absorption constraints, based on the idea that expanding the economy’s capital stock (in aggregate or...

We study how inefficiencies of market failure may be further amplified by political choices made by interest groups created in the inefficient market. We take an occupational choice framework, where agents are endowed heterogeneously with wealth and talent. In our model, market failure due to...