Using a dynamic model of a step-by-step innovation race between financially constrained firms, I study how financial constraints affect innovation activity. The novel theoretical results derive from an analysis of the interaction between the incentive effect of competition on innovation and the...

In this paper we explain the apparent diversification discount of conglomerates without assuming inefficent-cross subsidisation through internal capital markets. Instead we assume that an internal capital market efficiently redistributes scare resources across a conglomerates divisions between...

This paper examines the choice of tools for managing a firm’s operational risks: cash reserves, insurance contracts, and financial assets under an optimal financing contract that solves moral hazard between insiders and outside investors. Risk management is valuable as it reduces the costs of...

We expect firms that face uncertainty about their access to the financial markets to prioritize shorter term investments over longer term ones. Using a high quality panel data set, and a difference-in-differences approach to control for demand effects, we study whether this has been indeed the...

This paper provides an alternative real options framework to assess how firms' strategic interaction under imperfect competition a¤ects the industrial dynamics of investment, concentration, and expected returns. When firms have similar production technologies, the cross sectional variation in...

CEO incentive contracts are commonplace in China but their incidence varies significantly across Chinese cities. We show that city and provincial policy experiments help explain this variance. We examine the role of two policy experiments: the use of Special Economic Zones (SEZs) to attract...

This paper uses a new data-set to examine how internal capital markets and foreign ownership affect investment. Our data allow us to compare investment behaviour of listed subsidiaries with stand-alone firms while controlling for investment opportunities of parent and subsidiary firms. We...

This paper reveals the underlying market’s preferences over the on going Euro area sovereign debt crisis. It builds on a loss function with reference to the ‘basis’, the difference between the spread over swap and Credit Default Swap (CDS) for sovereign bonds. This loss function is general...

Throughout modern business history, contract has been used as an organizational technology that holds counterparties in formal or legally binding agreements. The proliferation of contract prompted the emergence of professional contract managers who played an important but relatively peripheral...

Markets reacted strongly to the World Trade Center attacks both in Europe and in the United States. The extent of this crisis was difficult to assess at the time, underlining the need for a specific tool to measure the magnitude of financial crises. A first measure was recently proposed and...