We analyze a publicly-traded firm's decision to stay public or go private, focusing on the stochastic nature of investor participation in the public market. The liquidity of public ownership is both a blessing and a curse: it facilitates trading and lowers the cost of capital, but it also...

We analyze a publicly-traded firm's decision to stay public or go private, focusing on the stochastic nature of investor participation in the public market. The liquidity of public ownership is both a blessing and a curse: it facilitates trading and lowers the cost of capital, but it also...

In this paper we identify the tradeoffs between objectivity and proximity as fundamental to the corporate governance debate. We stress the value of objectivity that comes with distance (e.g., the market-oriented U.S. system), and the value of better information that comes with proximity (e.g.,...

In this paper, we provide a novel rationale for credit ratings. The rationale that we propose is that credit ratings can serve as a coordinating mechanism in situations where multiple equilibria can obtain. We show that credit ratings provide a quot;focal pointquot; for firms and their...

We analyze an entrepreneur/manager's choice between private and public ownership. The manager needs decision-making autonomy to optimally manage the firm and thus has an endogenized control preference that is traded off against the higher cost of capital accompanying greater managerial autonomy....

In this paper we ask: what kind of information and how much of it should firms voluntarily disclose? Three types of disclosures are considered. One is information that complements the information available only to informed investors (to-be-processed complementary information). The second is...

This paper analyzes the optimality of conglomeration. We show thatthe potential benefits of conglomeration depend critically on the effectiveness of market discipline for stand-alone activities. Effective market discipline reduces the benefits of conglomeration. With ineffective market...

This paper briefly reviews the contemporary literature on relationship banking. We start out with a discussion of the raison d'etre of banks in the context of the financial intermediation literature. From there we discuss how relationship banking fits into the core economic services provided by...

This paper analyzes the optimal conglomeration of bank activities. We show that the effectiveness of market discipline for stand-alone activities (divisions) is of crucial importance for the potential benefits of conglomeration. We find that effective market discipline reduces the potential...

We review the economics of bank regulation as developed in the contemporary literature. We begin with an examination of the central aspects of modern banking theories in explaining the asset transformation function of intermediaries, optimal bank liability contracts, coordination problems...