The value-premium is the empirical observation that ldquo;valuerdquo; stocks (low market/book) have higher returns than ldquo;growthrdquo; stocks (high market/book). We propose a new explanation for the value-premium that we call the limits to growth hypothesis. To guide our testing, we use a...

In this paper, we compare the equity returns of dividend-paying and non-dividend paying firms. We find no unconditional return difference even though non-dividend paying firms have many characteristics that suggest high risk. Equivalently, because non-dividend paying firms have high...

Purpose – The value-premium is the empirical observation that “value” stocks (low market/book) have higher returns than “growth” stocks (high market/book). The purpose of this paper is to propose a new explanation for the value-premium that the authors call the limits to growth...

We show that the value maximizing hurdle rate for research and development (R&D) investments among private firms operating in a market setting is less than for conventional investments despite the fact that R&D has development risk. Because development risk arises only during R&D, entrepreneurs...

We investigate the economics of real estate investment when maintenance of a property enhances neighborhood value. Because a property owner does not recognize this positive externality for his/her neighbor, he/she under-maintains. Smaller properties benefit most from this externality. We show...

A key requirement for the start of many entrepreneurial businesses is private equity or venture capital financing. In the traditional approach to entrepreneurial investment analysis, an entrepreneur starts a new venture, and a venture capitalist finances the new venture, when business return...

We show economic depreciation decreases value maximizing investment hurdle rates and encourages both maintenance and growth. Economic depreciation without maintenance decreases the upside potential of future growth opportunities upon stochastically improved profitability. Managers forestall this...