Empirical methods in corporate finance for some time focused on the short-term market reaction to corporate announcements. The associated theories rely heavily on market imperfections such as taxes, transaction costs, information issues and contracting problems to obtain short-term market...

We show that corporate investment decisions can explain the conditional dynamics in expected asset returns. Our approach is similar in spirit to <link rid="b2">Berk, Green, and Naik (1999)</link>, but we introduce to the investment problem operating leverage, reversible real options, fixed adjustment costs, and...

We present a rational theory of SEOs that explains a pre-issuance price run-up, a negative announcement effect, and long-run post-issuance underperformance. When SEOs finance investment in a real options framework, expected returns decrease endogenously because growth options are converted into...

We theoretically and empirically investigate firm-level risk dynamics around seasoned equity offerings (SEOs). Empirically, beta increases before SEOs and decreases gradually thereafter. Using real options theory, commitment-to-invest generates a gradual post-issuance beta decline whereas...

Unconditional alphas are biased when conditional beta covaries with the market risk premium (market timing) or volatility (volatility timing). We demonstrate an additional bias (overconditioning) that can occur any time an empiricist estimates risk using information, such as a realized beta,...

Governments often have the power to take property rights from private citizens but their responsibility to pay compensation is typically not well specified. In this paper we examine how the compensation rule adopted by a country affects both private investment decisions and takings decisions. We...

The authors examine a sample of Canadian banks and use option pricing theory to infer the market value of a bank's assets from the observed market value and volatility of its equity. They find that market value estimates are significantly different from corresponding book values. These...

This study considers a model in which a corporate manager has private information and engages in i) anonymous trading on personal account in the secondary market, and ii) the corporate issuance of new shares in the primary market. The paper examines the equilibrium tradeoff of insider trading...

Seasoned equity offerings involve two significant events: registration followed by the decision to complete the issue or withdraw the registration. We present an empirical analysis of the interaction between seasoned equity issues, insider trading and the incorporation of information in prices...