Shipping goods internationally is risky and takes time.  To allocate risk and to finance the time gap between production and sale, a range of payment contracts is utilized.  I study the optimal choice between these payment contracts and their implications for trade.  The equilibrium contract...

We develop a model in which cash-constrained entrepreneurs seek a venture capitalist (VC) to finance a new firm. Costly monitoring is employed by VCs to reduce entrepreneurial moral hazard. When monitoring reveals poor performance, VCs want to punish the entrepreneur with liquidation. However,...

We present a model of cash constrained entrepreneurs who need an investor to finance their project. Investors can either be uninformed, such as individual bondholders, or informed, such as venture capitalists and banks. There is an entrepreneurial moral hazard problem, which can be partially...

This paper studies the consequences of a regulatory pay cap in proportion to assets onbank risk, bank value, and bank asset allocations. The cap is shown to lower banks' riskand raise banks' values by acting against a competitive externality in the labour market.The risk reduction is achieved...

We present a model for Financial fragility in which banks are risk-averse portfolio managers and there is uncertainty over risk management parameters. There is a danger of heightened risk aversion and projects in small economies are assumed to be riskier than those in large economies. In this...

How do firms finance large cash flow requirements?  We examine this in the context of firms that are subject to substantial cash flow requirements.  We find that trade credit, inventory and cash stock reductions are all important in the short term for mild requirements.  Larger and longer...

We show that introducing an external capital market with information asymmetry into a product market model reduces opportunistic substitution of sub-standard goods and encourages producers to concentrate on long-run reputation building.  We test this result with a laboratory experiment.  We...

This article reports a unique analysis of private engagements by an activist fund.  It is based on data made available to us by Hermes, the fund manager owned by the British Telecom Pension Scheme (BTPS), on engagements with management in companies targeted by its U.K. Focus Fund (HUKFF).  In...

Sometimes shareholders are better off delegating to a CEO with different objectives than their own. A top manager motivated to share surpluses with workers can encourage union members to adopt efficient production methods. Bond covenants may constrain managers from acquiescing to union wage...

China has sought to improve enterprise performance not through privatisation as in other transition economies, but through corporatisation as means of improving corporate governance. Actual governance practices of corporatised Chinese firms are however seriously defective, characterized by...