In the bank-borrower setting, a firm's existing lender may exploit its positional advantage to extract rents from the firm in subsequent financings. Analogously, a startup's existing venture capital investors (VCs) may dilute the founder through a follow-on financing from these same VCs (an...

A U.S. firm buying and selling its own shares in the open market can trade on inside information more easily than its own insiders because it is subject to less stringent trade- disclosure rules. Not surprisingly, insiders exploit these relatively lax rules to engage in indirect insider trading:...