A common method of valuing the equity in leveraged transactions is the flows-to-equity method whereby the free cash flow available to equity holders is discounted at the cost of equity. This method uses a standard definition of equity free cash flow, but the cost of equity varies over time as...

Using a new data set of small public firms in Germany, this paper analyzes the incentive and entrenchmenteffects associated witrh mangerial equity owernership. The relationship between firm value and insider ownership is found to be nonlinear: at low levels of ownership firm value is positive...

This paper tests two competing hypotheses about the influence of financial institutions as large shareholders on the performance of their industrial portfolio firms: the superior monitoring hypothesis versus the rent extraction hypothesis. The methodology of this study exploits the abolishment...

This paper analyzes the interaction between financial leverage and takeover activity. We develop a dynamic model of takeovers in which the financing strategies of bidding firms and the timing and terms of takeovers are jointly determined. In the paper, capital structure plays the role of a...

This paper examines the unification of non-voting preference shares into a one share one vote structure using a sample of all German dual-class companies from 1987 until 2003. We test several hypotheses with regard to the reasons for the abolition of preference shares.First, as the separation of...

We develop a continuous-time real options pricing model to study managers’incentives to cheat in the presence of equity-based compensation policies.We show that managers’ incentives to cheat are strongly influenced by theefficiency of the justice. Our model’s main result is that managers...

When information is costly, a seller may wish to prevent prospective buyers from acquiring information, for the cost of information acquisition is ultimately borne by the seller. A seller can achieve the desired prevention of information acquisition through posted-price selling, by offering...

Valuing early-stage high-technology growth-oriented companies is a challenge to current valuation methodologies. Efforts are redirected towards the design of investment contracts which materially skew the distribution of payoffs in favor of the venture investors. In effect, limitations in...

In this paper, we use a unique hand-collected dataset to analyze stock listing as an entrepreneurial decision. By comparing mainland Chinese entrepreneurial firmslisted in Hong Kong with the same type of firms opting for a domestic listing on the Shenzhen second board market, we argue that the...

Shareholder agreements govern the relations among shareholders in privately-held firms, such as joint ventures or venture capital-backed firms. We provide an explanation for the use of put and call options, tag-along rights, drag-along rights, demand rights, piggy-back rights, and catch-up...