We analyze the choice between a one-tier and a two-tier board structure in a firm with a large shareholder sitting on the board. The board has two tasks: project selection and monitoring the ability of the manager. In a one-tier structure, the sole board performs all tasks. In a two-tier...

In this study we extend the work of Vijh (1994), Barberis, Shleifer, and Wurgler (2005), Denis, McConnell, Ovtchinnikov and Yu (2003) and Geppert, Ivanov and Karels (2011) by examining the effects of the addition to or deletion from the S&P 500 index on the firm's Fama - French four factor model...

This paper describes how credit default swaps could be employed to create performance based executive compensation portfolios that reflect the value of a firm's debt as well as equity; i.e. the total value of all a firm's assets. We define so-called Asset Value Unit (AVU) compensation portfolios...

A corporate rating is an opinion from a rating agency about the debt payment capacity and willingness to pay of a private issuer. In principle, ratings issued by a third party should be unbiased and provide private information on credit quality to the market. Yet many researchers argue that such...

This study is an empirical attempt to investigate whether firms' bond issues mitigate rent extraction by their banks. To that end, I focus on the cash holdings of Japanese listed firms in the early 1980s, when Japanese banks used compensation balances as a device to extract rent from their...

The dividend puzzle, where consumers prefer capital gains to dividends due to differences in taxation, is examined in a two-period general equilibrium model with heterogeneous agents. Stressing the importance of interfirm equity holdings and their tax treatment, different scenarios where...

This paper analyzes an optimal incentive contract for an overoptimistic manager who overestimates the investment potential of the firm. It shows that, compared with a rational manager, an overoptimistic manager is willing to accept a linear incentive contract with a lower fixed wage. At the same...

The capital structure of banks has become the focus of an extended debate among policy-makers, regulators and academics. The seminal Modigliani-Miller (1958) theorem is seen as supportive of regulators' drive to require higher equity capital to banks. This raises the question on to what extent...

The article treats a new methodological approach to the company cash flows target-oriented forecasting based on its financial position analysis. The approach is featured to be universal and presumes application of the following techniques developed by the author: financial ratio values...

Recent literature argues that market timing becomes the factor that shapes financing policies. However, empirical studies on debt market timing still less numerous than those on equity market timing. This paper seeks to investigate the relevance of market timing considerations on debt issues...