Leveraging the detailed project-level data on biotech startups and their IPO records, this paper studies how adverse selection in capital markets affects financing decisions of entrepreneurs and firm values. By structurally estimating a dynamic model that features strategic experimentation and...

We model the repair of damaged corporate reputations through organizational structure reform. In a rational-choice framework our model explains the effects of the emergence and growth of the professional reputation-crisis management industry. The model produces two key conclusions: (a) Although,...

Given the increasing prevalence of catastrophic events, policymakers are increasingly searching for effective strategies to encourage firms to invest in resilience rather than relying on insurance or government assistance. Too often, however, resilience research focuses on decisions made by...

We show that measurable managerial characteristics have significant explanatory power for corporate financing decisions. First, managers who believe that their firm is undervalued view external financing as overpriced, especially equity. Such overconfident managers use less external finance and,...

Mutual fund holdings data reveal a significant impact of mutual funds on the capital expenditures ("CapEx'') of their portfolio companies. Following the shock to mutual fund ownership caused by the 2003 scandal, during which 25 fund families experienced significant outflows of capital, firms...

Governments and corporations frequently auction assets with embedded real options using both cash and contingent bids. I characterize equilibrium bidding and option exercise strategies, and find that the moral hazard associated with uncontractible investment timing inefficiently and...

We report laboratory experiments investigating the cyclicality of profit-enhancing investment in a competitive environment. In our setting, optimal investment is counter-cyclical when investment costs fall following market downturns. However, we do not observe counter-cyclical investment....

While academic and practitioner literature has advocated the use of real options in firms' long-term investment appraisal processes, few studies have examined the extent to which real options are incorporated into decisions when they are made available. We experimentally examine supervising...