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"We measure the impact of individual managerial beliefs on corporate financing. First, managers who believe that their firm is undervalued view external financing as overpriced, especially equity. We show that such overconfident managers use less external finance and, conditional on accessing...
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"Hedge fund managers are compensated via management fees on the assets under management (AUM) and incentive fees …-generating strategy typically lowers the fund's risk-adjusted excess return due to frictions such as price pressure. When the manager is … only paid via management fees, the manager optimally chooses time-invariant leverage to balance the size of allocation to …
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