This paper shows that asymmetric information about the timing of earnings can affect corporate capital structure. It sheds some new light on two following questions: why may profitable firms be interested in issuing equity, and why does debt not necessarily signal a firm quality. These issues...

In this article we argue that asymmetric information can explain why seignorage is an inferior choice to debt for governments. We also argue that the Ricardian equivalence for governments is very similar to what the Modigliani-Miller proposition is for corporations. Our model is based on Bolton...

This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" and the underinvestment problem

This note provides an explanation for why tax rates on capital gains are usually lower than ordinary income tax rates based on manager's agency problem related to "empire-building" and the underinvestment problem

Chatty and Saez (2004) argued that more Principal-Agent models explaining firm dividend policy are expected and subsequently offered a model of dividend policy that includes a tax on dividends and agency problems (Chatty and Saez (2007)). In this paper we extent their model by adding a tax on...

This note compares the investment policy and managerial compensation in family and non-family firms. The model is based on one hand a manager/shareholders conflict that should be more pronounced in non-family firms. Secondly large shareholders/small shareholders conflict should play a...

We consider a principal-agent relationship, where the agent is subject to a double moral hazardproblem (the choice of production effort and earnings manipulation). Since the agent cannot completely capture the results of his effort, the production effort is socially inefficient. The opportunity...

The literature analyzing games where some players have private information about their "types" is usually based on the duality of "good" and "bad" types (GB approach), where "good" type denotes the type with better quality. In contrast, this paper analyzes a signalling game without types...

This paper analyzes debt-equity choice for financing a two-stage investment when a firm’s insiders have private information about the firm’s expected earnings. When private information is one-dimensional (for example when short-term earnings are common knowledge while long-term earnings are...

We build a model of an IPO for firms with private information about their earnings profile over time and test the model’s predictions using a complete sample of newly listed Chinese companies between 1992 and 2007. The model predicts that IPO size is positively correlated with short-term...