This article demonstrates that a potential acquirer with a toehold bids aggressively and possibly overpays in equilibrium. The aggressiveness of a bidder with a toehold increases further if he is able to renege on his winning bid. A bidder without a toehold, however, responds by shading his...

Target firms often face bidders that are not equally well informed, which reduces competition, because bidders with less information fear the winner's curse more. We analyze how targets should be sold in this situation. We show that a sequential procedure can extract the highest possible...

Firms sometimes commit fraud by altering publicly reported information to be more favorable, and investors can monitor firms to obtain more accurate information. We study equilibrium fraud and monitoring decisions. Fraud is most likely to occur in relatively good times, and the link between...

We examine the costs and benefits of the global integration of initial public offering (IPO) markets associated with the diffusion of U.S. underwriting methods in the 1990s. Bookbuilding is becoming increasingly popular outside the United States and typically costs twice as much as a fixed-price...

We analyze whether risk shifting by a hedge fund manager is related to the manager's incentive contract, personal capital stake, and the risk of fund closure. We find that the propensity to increase risk following poor performance is significantly weaker when incentive pay is tied to the fund's...

We analyze the incentives of investment banks to develop innovative products. We show that client characteristics and market structure affect these incentives significantly. Investment banks with larger market shares have greater incentives to innovate and smaller banks are likely to share their...

We propose that it is precisely because firms' repurchases of their own stock through tender offers are associated with large stock-price increases that repurchases are unattractive as a means of distributing cash. As a result, firms distribute some cash in the form of dividends--despite the tax...

When a security trades at multiple locations simultaneously, an informed trader has several avenues in which to exploit his private information. The greater the proportion of liquidity trading by "large" traders who can split their trades across markets, the larger is the correlation between...

We examine the extent to which a fund's cash flows are affected by the stellar performance of other funds in its family -- and consequences of such spillovers. We show that star performance results in greater cash inflow to the fund and to other funds in its family. Moreover, families with...