Using data on listed and unlisted firms in the U.K., this study documents that average profitability changes systematically with age. In their early years, firms realize substantial profitability increases, while mature firms face slow declines in profitability. A model of endogenous...

We quantify how much nonfundamental movements in stock prices affect firm decisions. We estimate a dynamic investment model in which firms can finance with equity or cash (net of debt). Misvaluation affects equity values, and firms optimally issue and repurchase overvalued and undervalued...

Using data on a broad set of European firms, we find a strong positive relationship between the use of external financing and future productivity (TFP) growth within firms. This relationship is robust to various measures of financing and productivity, and strengthens as financing costs increase....

My dissertation focuses on two areas of financial economics. First, I look at the purchase and sale of operating units by companies. The first chapter characterizes the behavior of value-maximizing firms, which may invest in new capital, purchase existing assets or sell assets. This approach...

Purchases and sales of operating assets by firms generated $162 billion for shareholders over the past 20 years. This contrasts sharply with the evidence on mergers. This paper characterizes the behavior of value-maximizing firms, which may grow organically, purchase existing assets or sell...

The purchase and sale of operating assets by firms created $162 billion for shareholders over the past 20 years. This paper characterizes the behavior of value-maximizing firms, which may invest in new capital, purchase existing assets or sell assets. This approach yields an endogenous selection...

A rational, efficiency-based view of acquisitions imply that larger transactions generate greater gains for the acquirer and the seller. We test this prediction and find a positive relationship between acquirer abnormal returns and transaction size. This relationship holds for many classes of...

This study presents a model in which firms invest in Ramp;D to generate innovations that increase their underlying profitability and invest in physical capital to produce output. Estimating the model using a method of moments approach reveals that Ramp;D expenditures contribute significantly to...

The expected return to equity mdash; typically measured as a historical average mdash; is a key variable in the decision making of investors. A recent literature uses analysts' forecasts, investor surveys or present-value relationships and finds estimates of expected returns that are sometimes...

We examine the evidence on excess stock return predictability in a Bayesian setting in which the investor faces uncertainty about both the existence and strength of predictability. When we apply our methods to the dividend-price ratio, we find that even investors who are quite skeptical about...