We develop a model of trading by an informed fund manager compensated on the basis of her fund's Net Asset Value (NAV) and show that she has an incentive to pump her portfolio by buying securities already held by her fund. Such portfolio pumping leads to excessive trading and diminished...

In the 1990s, many load funds introduced additional share classes that give investors the choice of paying back-end loads and/or annual fees instead of front-end loads. The transition to a multiple-class structure provides a well-controlled setting for research with regard to investor clienteles...

In the 1990s, a large majority of funds with front-end loads introduced additional share classes, which allowed investors to pay annual fees and/or back-end charges instead of a front-end load. The transition to a multiple-class structure provides a natural experiment with regard to investor...

We examine the extent to which a fund's cash flows are affected by the stellar performance of other funds in its family - and consequences of such spillovers. We show that star performance results in greater cash inflow to the fund and to other funds in its family. Moreover, families with higher...

Prior literature argues that stock-for-stock mergers are often financed by overvalued stock. How do a target's institutional owners trade when faced with a stock-financed bid, particularly one from an acquirer more likely to be overvalued? If institutional owners perceive the acquirer's stock as...

Prior literature argues that stock-for-stock mergers are often financed by overvalued stock. How do a target's institutional owners trade when faced with a stock-financed bid, particularly one from an acquirer more likely to be overvalued? If institutional owners perceive the acquirer's stock as...

We argue that powerful CEOs induce their boards to shift the weight on performance measures towards the better performing measures, thereby rigging the incentive part of their pay. The intuition is developed in a simple model in which some powerful CEOs exploit superior information and lack of...

To estimate the grant-date expense of their employee stock options (ESOs), as required under the new accounting rules (FAS 123R), companies have typically had to choose among various theoretical valuation models because there is no secondary market for ESOs. Different models, all permissible...

It is widely believed that contrary to standard asset allocation theory, employees irrationally hold concentrated investments in company stock in their 401(k) plans thus bearing firm-specific risk that could otherwise have been diversified away [See for example, Benartzi (2001)]. However, in...

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...