Using cross-sectional analysis of corporate dividend policy we show that large shareholders extract rents from firms and expropriate minority shareholders in the weak corporate governance environment of an emerging economy. By comparing dividends paid across varying corporate ownership struc-...

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...

After the seminal paper of Jarrow and Rudd (1982), several authors have proposed to use different statistical series expansion to price options when the risk-neutral density is asymmetric and leptokurtic. Amongst them, one can distinguish the Gram-Charlier Type A series expansion (Corrado and...

Volatility risk premia compensate agents for holding assets whose payoffs correlate with times of high return variation. This paper takes a structural approach to explain the cross-section of volatility risk premia of stocks using a Lucas orchard with heterogeneous beliefs, stochastic...

Several authors have proposed series expansion methods to price options when the risk-neutral density is asymmetric and leptokurtic. Among these, Corrado and Su (1996) provide an intuitive pricing formula based on a Gram-Charlier Type A series expansion. However, their formula contains a...

We develop an equilibrium model of debt maturity choice of firms, in the presence of fixed issuance costs in primary debt markets, and an over-the-counter secondary debt market with search frictions. Liquidity in this market is related to the ratio of buyers to sellers, which is determined in...

This paper analyzes banks’ choice between lending to firms individually and sharing lending with other banks, when firms and banks are subject to moral hazard and monitoring is essential. Multiple-bank lending is optimal whenever the benefit of greater diversification in terms of higher...

Corporate finance theories suggest that problems of asymmetric information and moral hazard in credit markets can be addressed by choosing short-term maturities. Theories of debt renegotiation suggest that the credibility of the implicit commitment to not make concessions to insolvent borrowers,...

The availability of credit varies over the business cycle through shifts in the leverage of financial intermediaries. Empirically, we find that intermediary leverage is negatively aligned with the banks’ value-at-risk (VaR). Motivated by the evidence, we explore a contracting model that...

Banks operating under Value-at-Risk constraints give rise to a welldefined aggregate balance sheet capacity for the banking sector as a whole that depends on total bank capital. Equilibrium risk and market risk premiums can be solved in closed form as functions of aggregate bank capital. We...