There is a wide variation in the structure of financial systems in different countries. We compare two idealized polar extremes. In one, which we refer to as the "German model," banks and other intermediaries predominate. In the other, which we refer to as the "U.S. model," financial markets...

There is some empirical evidence that high tax bracket investors hold the equity of unlevered firms while law tax bracket investors hold levered firms. It has been suggested that an extension of the Miller model can provide a theory which is consistent with this observation. However, it has been...

A linear duopoly model is used to consider investment and financing decisions. Bankruptcy is assumed to cause a delay in investment which is not costly in itself. However, the imperfect competition in the product market means this delay puts the bankrupt firm at a strategic disadvantage which...

The firm can be regarded as consisting of several groups of investors and managers whose interests are regulated by the contracts between them. This survey covers the literature that looks at the nature of optimal financial contracts in the face of various asymmetries of information, control and...

A welfare analysis of a simple noisy rational expectations model is carried out. It is shown that the more information prices convey, the worse off everybody can be. However, the equilibrium where everybody is uninformed may not be Pareto optimal: imposing a tax on information gathering which...

A welfare analysis of a simple noisy rational expectations model is carried out. It is shown that the more information prices convey, the worse off everybody is. However, the equilibrium where everybody is uninformed may not be Pareto optimal: imposing a tax on information gathering which...

There is often a reliability problem when information is sold since anyone can claim to have superior knowledge. Optimal strategies which allow the seller to overcome this problem are considered in the context of a standard one-period two-asset model. It is shown that when the seller’s risk...

This paper contains a survey of the literature on dividend policy. We start with a description of the Miller-Modigliani dividend irrelevance proposition and then consider the effect of relaxing the assumptions it is based on. In particular, we consider the role of taxes, asymmetric information,...