We study the relation between compensation practices, incentives, and performance in private equity using new data that connect ownership structures, management contracts, and quarterly cash flows for a large sample of buyout and venture capital funds from 1984-2010. Although many critics of...

Uncertainty about management appears to affect firms’ cost of borrowing and financial policies. In a sample of S&P 1500 firms between 1987 and 2010, CDS spreads, loan spreads and bond yield spreads all decline over the first three years of CEO tenure, holding other macroeconomic, firm, and...

We study the efficiency of internal capital markets at state-controlled and privately owned business groups in China. Using highly granular data on within-group capital flows, we document stark differences: while private groups allocate more capital to units with better investment opportunities,...

This paper identifies a limit to arbitrage that arises from the fact that a firm's fundamental value is endogenous to the act of exploiting the arbitrage. Trading on private information reveals this information to managers and helps them improve their real decisions, in turn enhancing...

This paper introduces the impact of debt misvaluation on merger and acquisition activity. Debt misvaluation helps explain the shifting dominance of financial acquirers (private equity firms) relative to strategic acquirers (operating companies). The effects of overvalued debt might seem limited...

Stock-based compensation is the standard solution to agency problems between shareholders and managers. In a dynamic rational expectations equilibrium model with asymmetric information we show that although stock-based compensation causes managers to work harder, it also induces them to hide any...

CEOs have a potential conflict of interest when their company is acquired: they can bargain to be retained by the acquirer and for private benefits rather than for a higher premium to be paid to the shareholders. We investigate the determinants of target CEO retention by the acquirer and whether...

Different economies at different times use different institutional arrangements to constrain the people entrusted with allocating the economy's capital and other resources. Comparative financial histories show these corporate governance regimes to be largely stable through time, but capable of...