This paper offers an explanation for the underpricing of best efforts new issues and demonstrates that best efforts contracts allow issuers to use information from the market. If investors obtain information that indicates that a project will not be profitable, their demand will be low and the...

In a takeover contest, the presence of bidders' existing debtholders, if they can be expropriated by issuing new debt with equal or senior priority, allows bidders to commit to bid more than their valuation of the target. Such commitment can be beneficial because it deters potential entry by...