We investigate the functioning of internal capital markets in Indian Business Groups. We document that intra-group loans are an important means of transferring cash across group firms and that such transfers are typically used to support the financially weaker firms. Groups significantly...

We study the balance sheet of liquidity: the relation between the liquidity of the firm's assets and the liquidity of financial claims on the assets, thereby linking corporate finance decisions to stock liquidity. Our model highlights an ambiguous relationship. While greater asset liquidity...

While standard contract theory suggests that a CEO should be paid relative to a benchmark that removes the effects of sector performance (otherwise referred to as luck), there is overwhelming evidence that CEO pay is strongly and positively related to such luck. In this paper we offer an...

Can institutional stock sales influence firm governance? Theory suggests that informed selling is likely to depress prices and disperse shareholding. Combined, both effects can influence firm governance by facilitating takeovers. I formalize this hypothesis and test its predictions using data on...

We investigate the importance of reputation-based implicit contracts in firm financing in the context of Indian Business Groups. The group structure enables us to cleanly analyze the negative spillovers on other firms, triggered by a member firm defaulting on its debt obligations. We hypothesize...

Using 30,466 bank loan deals originated during 1990-2005, we examine why firms switch to new banks for their repeat loans instead of staying with their relationship banks. Employing a variety of measures to proxy for firms' informational transparency, we find that the soft information...

Using 30,466 bank loans originated during 1990-2006, we examine why firms switch to new banks for their repeat loans. Employing a variety of measures to proxy for firm-level asymmetric information, we find a non-monotonic relationship between the extent of information asymmetry and a firm's...

We predict a positive relationship between the liquidity of the firm's assets and the liquidity of its stock. This relationship depends on market expectations regarding the deployment of the firm's liquid assets. Thus our hypothesis links stock liquidity to managerial actions that change the...

Using economic distress in an industry as a natural experiment, we test the alternate theories of conglomeration. We find that segments in distressed industries experience better performance than single-segment firms. The distressed segments have higher sales growth, higher Ramp;D expenditure...

We analyze a publicly-traded firm's decision to stay public or go private when managerial autonomy from shareholder intervention affects the supply of productive inputs by management. We show that both the advantage and the disadvantage of public ownership relative to private ownership lie in...