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...

We treat information acquisition by potential investors in IPOs asendogenous. With endogenous information, the critical question iswhy underwriters would allow investors to spend resources acquiringsuperior information intended solely to effect a wealth transfer. Weshow that institutional...

We study product innovation and imitation in the market of corporate underwriting with a dynamic model where client switching costs and the bankers’ expertise in deal structuring characterize the life cycle of a security. While the clientele loyalty allows positive rent extraction, the superior...

This paper studies the impact of cash constraints on equilibrium research intensities in a patent race between a current owner of the “state of the art” technology (the incumbent) and entrants. We develop a simple model, where players need to raise funds from imperfectly informed creditors to...

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...

We provide a direct estimate of the magnitude of agency costs in U.S. publicly-held firms. Using a sample of 1,307 firms in 1992-1997, we compute an explicit performance benchmark that compares a firm’s actual Tobin’s Q to the Q∗ of a hypothetical fully-efficient firm having the same...

Investment banks develop their own innovative derivatives to underwrite corporate issues but they cannot preclude other banks from imitating them. However, during the process of underwriting an innovator can learn more than its imitators about the potential clients. Moving first puts him ahead...

Investment Banks invest in R&D to design innovative securities even when imitation is possible, i.e., when innovations cannot be patented. We show how a financial institution can profit from the development of financial products even if they are unpatentable. For certain types of financial...

Investment banks imitate other banks innovative corporate securities with their own varieties, and compete with the innovator to underwrite new issues. This paper uses data of all the corporate offerings of Equity-Linked and Derivative Securities from the SDC records to estimate the issuers...