This paper develops a tractable real options framework to analyze the effects of asymmetric information on investment and financing decisions when firms require external funds to finance investment. Our analysis shows that corporate insiders can signal their private information to outside...

This paper examines the impact of managerial entrenchment on corporate financing decisions. We build a dynamic contingent claims model in which financing policy results from a trade-off between tax benefits, agency conflicts, and contracting frictions. In our setting, managers do not act in the...

This paper examines the role of bond ratings and the effects of rating-based regulations in the corporate bond market. Exploiting an unanticipated mechanical change in how the benchmark Lehman bond indices are constructed in 2005, we show that rating-induced market segmentation of the bond...